Legislative council gets no definite answers from gasline proponents

Yukon Pacific has engineering, permits, but no gas; North Slope producers have gas, but are still working on economics; Foothills has governmental authorizations but no gas, is restarting state right of way process

By Kristen Nelson

PNA Editor-in-Chief

There are no ‘done deals’ to get North Slope natural gas to the Lower 48, or to any other destination, but the Legislature’s Joint Committee on Natural Gas Pipelines got an update from representatives of major projects at a mid-July meeting in Anchorage.

Proponents — the North Slope producers (who are evaluating two projects), Yukon Pacific Corp., Foothills Pipe Lines, the Alaska Port Authority and the Cook Inlet Pipeline Terminus Group — represented three liquefied natural gas projects, all of which would require a pipeline to bring the gas to tidewater, and two projects to take gas into Canada and ultimately to the Lower 48 by pipeline, either along the trans-Alaska oil pipeline and the Alaska Highway or across the Beaufort Sea into Canada and then down the Mackenzie River.

Different players hold different pieces

Yukon Pacific Corp. appears to have the most permitting tied down and has years of engineering and economics work for its LNG project — but has no gas.

The North Slope producers group has gas, but is still working on economics and the preliminary engineering for two projects, a gasline to the Lower 48 and an LNG project that would ship from a plant at either Valdez or on the Kenai Peninsula.

Foothills, the old Alaska Highway gas pipeline project, has authorizations from the U.S. and Canadian governments to build a gasline, but has no gas. Foothills needs to finalize its state of Alaska rights of way, and a memorandum of understanding signed with the state July 18 allows that process to move forward. The company estimates 18 to 36 months to finalize all of its existing rights of way and certificates once a project application is submitted.

The Alaska Port Authority believes it has the financial advantage with access to public-entity financing and has done both economic and engineering studies, but has no gas and no permits. Charlie Cole said the authority project — an LNG plant at Valdez — is economic as part of a pipeline project to the Lower 48 and if liquid propane is extracted at Valdez.

The Cook Inlet Pipeline Terminus Group has no gas, no permits and no project, but wants to ensure that North Slope gas reaches Southcentral Alaska.

The Alaska Gas Producers Pipeline Team —BP Exploration (Alaska) Inc., ExxonMobil and Phillips Alaska Inc. — had expected to file permit applications this year, but now says that won’t happen until the first quarter of 2002. The group has already spent more than the $75 million budgeted for the project in 2001, said Joe Marushack of Phillips, and Ken Konrad of BP said the producers are now looking at taking the gas clear into Lower 48 markets with some expansion and some new pipelines at a total cost of $15-$20 billion. There are real economic challenges and it is not clear that the project will be economic, Konrad said.

Alaskans could be working on the southern as well as the northern sections of a line because the northern section could only be built in the winter and the crews could be moved to southern sections in the winter, keeping working teams together. And if a Mackenzie Valley line gets started first, he said, an Alaska line would probably have to wait because there wouldn’t be enough skilled labor for both.

Konrad told the committee that the team is working hard on the economics, but, he said, we have very little influence on the politics — and the politics, he said, can kill this project. By the end of the year the team expects to have route selection and a determination of whether the project is economic. The producers group is evaluating both an Alaska Highway route and a route across the Beaufort and down through Canada.

Yukon Pacific working in field

Yukon Pacific has had bids done on two sections of a pipeline project and Lowenfels said the company believes that the cost of an LNG project with delivery to North America would be only 6 percent above estimates of a highway project to Alberta. Both estimates are based on 4 billion cubic feet a day of natural gas and the highway project to Alberta is estimated at $12.8 billion and LNG to North America at $13.6 billion. LNG receiving facilities are not included in the $13.6 billion.

Williams updates Legislative gas committee

Kay Cashman

A $32 billion U.S. energy company with more than $340 million in fixed assets in its subsidiary Williams Alaska Petroleum Inc, Williams worldwide assets include exploration and production, pipelines and petrochemicals. The company is the nation’s largest-volume transporter of natural gas and was the project director in the 1970s of the Alaska portion of the Alaska Natural Gas Transportation System (ANGTS).

Williams not only has expressed an interest in being a player in an Alaska Highway gasline, but has assembled a dedicated, cross-functional, nine-person team to evaluate the opportunity for value-added investments, such as a petrochemicals industry for Alaska.

Among other things, Carlton told committee members that a world class ethane cracker in Alaska would utilize just 10 to 30 percent of the ethane from the natural gas liquids flowing through a North Slope gas pipeline.

“We’re trying to use the experience we have to find a way to add value that cannot be added in any other way to this project – look at if it makes sense to remove part of the liquids in Alaska and use them as a foundation for a petrochemicals industry,” Carlton said.