|
Chenault pans Senate bullet line impasse Tells Commonwealth North that no action on in-state gas will push LNG import; bullet line open season would test gas-line viability Alan Bailey Petroleum News
House Speaker Mike Chenault, R-Nikiski, says that the failure of the Alaska Senate to pass legislation to move forward a project for an in-state gas pipeline is placing Southcentral gas consumers at risk of an extended need for high-cost, imported liquefied natural gas.
“Why in the world would Alaska ever want to import LNG?” Chenault asked during a talk to Commonwealth North’s Energy Action Coalition on May25.
Chenault had been sponsor of House Bill 9, legislation that would have allowed the Alaska Gasline Development Corp., or AGDC, established by the Legislature in 2010, to reach an open season for a gas line to deliver North Slope natural gas to Southcentral Alaska. But after passing the House the bill died in the Senate, stymied by opposition to committing state funds to a project that some lawmakers now view as unjustified.
Pipeline proposal Last year Dan Fauske, AGDC president, put forward a plan for developing the in-state line, a 24-inch gas pipeline from the North Slope to an existing gas transmission line north of Anchorage, with the option of a spur line to Fairbanks in the Alaska Interior. The line would have a capacity of 500 million cubic feet per day, the maximum allowed under the Alaska Gasline Inducement Act, or AGIA.
The estimated cost of the line is about $7.5 billion, a sum of money that would be raised by selling state revenue bonds. The prime driver behind the proposed pipeline is growing concern about future gas supplies for heating buildings in Southcentral Alaska, and for generating electricity. But the viability of the pipeline would depend on some industrial use of gas in Southcentral, such as the manufacture of liquefied natural gas or the extraction of natural gas liquids, both of which products could be exported.
Fauske has said that potential industrial shippers have expressed interest in fully using the capacity of the line.
But determining viability of the pipeline project depends on conducting an open season in which potential gas shippers would commit to booking capacity in the line within some agreed fee structure.
House Bill 9 would have provided the remaining $200 million of an estimated $400 million in state funding required to move the project to that open season.
Opposition However, some lawmakers now oppose putting any further state money into the project.
Sen. Bill Wielechowski, D-Anchorage, a vociferous opponent of House Bill 9, said in a May1 briefing that, although he had in the past supported the in-state gas line project as insurance against Southcentral gas shortages, a U.S. Geological Survey Cook Inlet oil and gas assessment published last year had convinced him that there was enough gas remaining in the Cook Inlet basin to meet local needs for 200 years or more. And thanks to state incentives passed by the Legislature, Cook Inlet gas exploration is booming, he said.
Wielechowski said that in addition to the money needed to reach an open season, the state could end up having to subsidize the gas line “to the tune of billions,” while discouraging Cook Inlet exploration and pushing up heating costs in Southcentral Alaska.
“Spending hundreds of millions to billions for a gas line that could double or triple your heating costs when we have enormous new gas discoveries right in our backyard makes no sense,” Wielechowski said, adding that a cheaper alternative for supplying gas to Fairbanks would be the construction of a gas line north from the Cook Inlet.
Open season delay Chenault, in his talk to the Commonwealth North group, lambasted the criticism of House Bill 9, saying that the failure by the Senate to pass the bill has likely deferred a pipeline open season by a year or two.
“Until we get to an open season it’s all talk,” Chenault said, commenting that that an open season would determine whether there are buyers and sellers willing to make a 30-year commitment to justify construction of the line.
The funding specified in House Bill 9 would have paid for activities such as the engineering work required to prepare for an open season. And the legislation does not require the state to foot the $7.5 billion bill for pipeline construction — that money would come from bonds purchased by investors from outside the state, Chenault said.
These outside investors would incur the risk of the project not working out, he said.
Although state incentives have encouraged an upsurge in Cook Inlet gas exploration, there is no certainty that this exploration will result in the discovery of sufficient new gas to meet Southcentral Alaska’s future gas needs, Chenault said.
“There certainly could be (enough gas). And I hope there is, because I can tell you right now that your utility corporations cannot get a contract for more than a year, maybe two years, on a firm commitment to supply gas,” he said.
And shipping gas by pipeline from Cook Inlet to Fairbanks would be a great idea if there is enough gas available from the Cook Inlet to enable this to happen.
LNG imports Meantime, doing nothing to deal with the gas supply situation increases the likelihood that Southcentral Alaska will become dependent on the import of expensive LNG for an extended period of time, rather than just having to import LNG as a short-term fix during a transition in gas supply arrangements — the likelihood is that Alaska would have to purchase LNG at premium Asian prices, he said.
The House Bill 9 related pipeline project is “the only project in the state that is moving forward,” Chenault said.
And, while it is true that it would be cheaper to ship gas from the North Slope on a larger line than the 24-inch line that AGDC has proposed, the terms of AGIA limit the line to a maximum capacity of 500 million cubic feet per day, he said.
“Nobody wants to change that law,” Chenault said. “There are folks out there who still think that the AGIA process is the only way that we’re going to move forward.”
| 