Exporting Alaska gas a ‘no brainer’

Japan logical market, researchers say; Alaska Railroad faces losing majority of federal funding in Senate version of transport bill

Steven Merritt

For Petroleum News

The question of whether to export Alaska natural gas should be a “no-brainer,” and American reserves should be used to a U.S. geopolitical advantage, according to two researchers at the American Enterprise Institute.

In an opinion piece in the Wall Street Journal, Michael Mazza and Gary Schmidt note that since Japan shut down its nuclear power plants in the wake of the Fukushima disaster, 30 percent of the country’s capacity to produce electricity was lost. To fill that void, Japan imported some 80 million tons of LNG last year from around the world at a cost of $66 billion. That demand will continue to grow, according to the Journal opinion.

Mazza is a research fellow at AEI, and Schmitt is director of AEI’s Marilyn Ware Center for Security Studies.

“But one corner of the world that has hardly made a dent in this new market is Alaska,” the AEI researchers write. “America’s northernmost state has the gas reserves to meet a substantial part of Japan’s demand. Estimates suggest that the North Slope fields and reserves on the outer continental shelf hold as much as 236 trillion cubic feet of gas — enough to serve the Japanese utilities’ needs for over 90 years at current rates of consumption.”

Also, “a Japan that is less reliant for its energy on unstable Middle East regimes or Russia is more likely to be a dependable ally in confronting common security challenges,” the men write.

They add that while in just a few short years, the United States has gone from being an importer of LNG to being potentially “the Saudi Arabia of natural gas,” with new drilling technology in hydraulic fracturing, it is doubtful Alaska’s gas will be tapped for U.S. consumption if there is no Asian market. “Given the extraordinary amount of reserves in the lower 48 states, Canada and in the Gulf of Mexico, the cost of extracting and shipping gas from Alaska’s North Slope would make it uncompetitive with gas from those other sources,” Mazza and Schmidt write.

But politics both in Washington and Juneau threaten to undermine export of U.S. LNG, according to the Journal opinion. Nationally, opponents see stopping exports as a way to curb hydraulic fracturing as well as to keep U.S. supplies high and prices low. On the state level, with November elections looming, the opinion piece states, “legislators are fussing over the royalty payments companies will be expected to pay to the state for extracting natural gas from its fields ... worried that their constituents will judge them as having failed in getting as much from the companies as is possible.”

• Read full story here: http://on.wsj.com/KNENnn.

Senate bill strips most of ARRC funding

But according to a recent report in Progressive Railroading, the Alaska Railroad could face a fundamental shift in its operations if federal funding is lost, a change that the ARRC CEO hopes doesn’t come down to politics.

According to Progressive Railroading, which quotes ARRC President and Chief Executive Officer Christopher Aadnesen, “if the Senate’s version of the transportation legislation becomes law, ARRC stands to lose a majority of the federal dollars it relies on annually to pay for critical infrastructure maintenance and improvements, according to Aadnesen.”

That potential cut, in the range of $25 million to $30 million of the $36 million the ARRC typically receives in annual Federal Transit Administration funding, could have a huge affect on the railroad’s passenger service, equipment and infrastructure as well as its annual $16 million in debt payments, according to Progressive Railroading.

Aadnesen told the industry publication he believes ARRC is being “singled out” by the Senate legislation as a special interest “earmark,” and cited politics as the likely reason for the measure, due to a compromise brokered by Alaska’s congressional delegation in the SAFETEA-LU Act of 2005 that allowed 60 percent of ARRC track mileage to qualify for Federal Transit Administration funding instead of the originally proposed 10 percent.

“There are lawmakers who remain in Congress today who did not support that original compromise and ‘still hold a grudge’ against ARRC receiving those federal dollars, Aadnesen says,” the Progressive Railroading piece states. “As a result, the Senate’s version of the legislation would define much of ARRC’s funding as an earmark, making ARRC ineligible to receive it.” The railroad isn’t seeking a special provision under the bill, Aadnesen told Progressive Railroading, rather it is simply a public transportation agency “seeking equitable treatment under the funding formula.”

• Read full story here: http://bit.ly/MUHzX4.