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One gas hub may not fit all needs, says state
petroleum manager Van Dyke proposes letting hubs grow when and where needed, don’t overspend on gas line and accessories Steve Sutherlin PNA Managing Editor
The idea of the state taking the lead role in developing a central gas hub in Alaska is not practical, says Bill Van Dyke, petroleum manager, Alaska Division of Oil and Gas.
He said legitimate user need is the only basis for establishing a hub, not a huge state investment in valves and piping “that might never be used. If it happens it happens.”
“From the plumbing side of the equation, there will be a hub at Fairbanks no matter what happens,” because of the large gas market in that area, Van Dyke said.
The connection policies must be transparent, he said, to allow people to take gas off or to put gas on from fields along the route when and where needed, he said.
Van Dyke said that if the line was pre-tapped for anticipated future use, the investment in the tap would be modest. Otherwise new discoveries could require costly and complicated taps.
“If someone finds gas in the Brooks, they’re going to tap it right there,” he said. “You can put these connections in later, but it’s more hassle,” he said.
“You’d have to hot-tap the line; you couldn’t shut it down or evacuate it,” he said, adding that technicians hot-tap gas lines all the time.
Alternatively the line could be tapped at one of the pigging stations or compression stations along the way, Van Dyke said. Caution on state involvement Van Dyke said it was unlikely that a natural gas pricing hub would develop in Alaska, given the industry’s comfort level with pricing mechanisms at current hubs in Canada and the United States. “The market is so transparent you couldn’t make it any better,” he said.
He said the idea of state ownership of a large line from Prudhoe Bay deserved careful analysis.
“There are some benefits but big cost if the state wants to be an equity owner; you’ve got to pay for your share up front,” Van Dyke said.
Installing a large diameter pipe to allow for future demand would put too great a burden on the project because of its effect on up-front costs, he said.
“It’s better to design the pipe so you can put in some compressor stations when you need (them) — pipe is too expensive,” Van Dyke said. “The expandability will need to be there, if you just throw in a compressor station then you pay for it when you need it.” Spending too much on the pipe would make tariffs higher and net back taxes lower, because transportation costs would reduce what the state collected, he said.
“Royalty taxes bear the cost if the line is overbuilt,” Van Dyke said. “We can’t afford to pay for capacity that is not needed currently, and maybe not needed forever,” he said: “Let new gas carry new costs.”
He said the hub and the state’s equity involvement in a gas line have not been extensively explored and will be subject to further study and discussion.
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