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How helpful is federal loan guarantee? Amid renewed talk of LNG exports, people ponder what sort of Alaska gas pipeline project might qualify for government backing Wesley Loy For Petroleum News
With Alaska politicians and oil company executives talking — again — about prospects for exporting liquefied North Slope natural gas, the question has arisen — again — whether the federal loan guarantee could be used for such a project.
The short answer is no, not for a project that “ships gas exclusively overseas,” says Larry Persily, the federal coordinator for Alaska natural gas transportation projects.
“The law says that to be eligible for the guarantee, gas must come to the continental U.S.,” Persily told Petroleum News in a Jan. 25 email.
Origin of loan guarantee Congress, with the Alaska Natural Gas Pipeline Act of 2004, provided for a loan guarantee to help support development of a North Slope gas line.
A gas line long has been one of Alaska’s fondest economic development dreams. But the extraordinary cost — today estimated at tens of billions of dollars — has precluded construction of a pipeline to carry the Slope’s enormous stranded gas reserves.
That hasn’t, however, discouraged Alaska politicians from continually prodding the state’s major oil producers to mount the project, a super risky venture the companies so far have been reluctant to undertake.
Recently, Alaska Gov. Sean Parnell has pushed the idea that a gas line to support liquefied natural gas, or LNG, exports from Alaska’s southern coast to Asia might be a more viable option than a gas pipeline into Canada to supply the North American market. The law, verbatim Persily highlighted sections of the 2004 pipeline act pertinent to the loan guarantee.
The 2004 law set the guarantee at $18 billion, with an inflation escalator, Persily says.
“My calculations put it at a shade over $21 billion today,” he says.
The project eligibility provision in the law reads:
“QUALIFIED INFRASTRUCTURE PROJECT — The term ‘qualified infrastructure project’ means an Alaskan natural gas transportation project consisting of the design, engineering, finance, construction, and completion of pipelines and related transportation and production systems (including gas treatment plants), and appurtenances thereto, that are used to transport natural gas from the Alaska North Slope to the continental United States.”
One of Alaska’s U.S. senators, Lisa Murkowski, helped win passage of the 2004 pipeline act.
Murkowski’s view On Jan. 29, Murkowski appeared on the television show Platts Energy Week to talk about President Obama’s recent State of the Union address, in which he highlighted the nation’s enormous gas potential.
“We have a supply of natural gas that can last America nearly 100 years,” the president said in his address. “And my administration will take every possible action to safely develop this energy.”
Murkowski, the top-ranking Republican on the Senate Energy and Natural Resources Committee, said on the show she was impressed with Obama’s strong comments on gas.
The show host, Bill Loveless, asked her about the proposed Alaska gas line. Here’s most of the exchange:
Host: “With the glut of gas in the Lower 48, some say the time has come to say that pipeline will never get built. Would you agree with that?”
Murkowski: “I think you need to put it into context, and the best way to do it is look at the geography. Alaska’s not part of any grid in the Lower 48. We’re not tied into any transmission systems, any infrastructure. We are kind of a country unto ourselves up there. And so when we’re talking about natural gas markets, I think it’s critically important to make the distinction between the Lower 48 markets and what we have in Alaska with enormous amounts of conventional natural gas.”
Host: “And what do you think is the best option for moving that gas to market?”
Murkowski: “I am committed to moving Alaska’s natural gas to market. Our market may not be in the Lower 48. It may be an export market.”
Host: “And do you think that’s more likely now than it has been?”
Murkowski: “I think it’s probably more likely. I’m very committed to making sure that Alaskans gain access to our gas as well. We’re paying some of the highest energy costs of anybody in the entire country. We’ve got our second largest community that is looking to truck gas from the North Slope because we don’t have a pipeline yet.”
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