July 20, 2008

The Push for Gas Line From Inlet to Interior

By Tim Bradner, Alaska Journal of Commerce, Anchorage

Jul. 20--The state of Alaska will push for construction of a small-diameter gas pipeline from Southcentral to Interior Alaska with a capacity of carrying 450 million cubic feet per day. It would be the first phase of a gas distribution system to bring natural gas from Cook Inlet fields to Fairbanks and other Interior communities now dependent on fuel oil.

Gov. Sarah Palin said July 7 that the pipeline could eventually connect with a large-diameter pipeline from the North Slope if that is built. Meanwhile, Cook Inlet gas supplied to Interior communities could help alleviate the hardships of soaring energy prices.

"While we have publicly been focusing our efforts on AGIA (the Alaska Gasline Inducement Act) and our overland gas route to Canada and the Lower 48, we have also been working on an in-state gas line that can swiftly address the needs of Interior and Southcentral Alaskans while we continue our progress on AGIA," Palin said in a press conference.

The governor has asked Enstar Natural Gas Co., a gas utility serving Southcentral Alaska, and the Alaska Natural Gas Development Authority to work on a financing and construction plan.

The governor said the state could invest in the pipeline, which could cost $2 billion to $3 billion, to lower costs of transporting gas to consumers. If a large-diameter pipeline from the North Slope is delayed or not built, the small pipeline, which would be 20 inches to 24 inches, could be extended to the North Slope in a second phase.

A financing and commercial structure for the project will be developed over the next few months, the governor said. She said the state Legislature would be asked to approve legislation relating to the project in its 2009 legislative session, which begins in late January.

The governor said she hopes permitting for the project can be done over the next two years with construction beginning in 2011 and the pipeline going into operation by 2013. The soonest a large-diameter pipeline could be built from the North Slope would be 2018 to 2020 under a plan put forward by TransCanada Corp. or a competing project being pursued by the Denali gas pipeline project supported by BP and ConocoPhillips.

The larger pipeline would transit Interior Alaska on a route to Canada's Yukon Territory and Alberta, where it would connect with existing gas pipelines.

The public-private partnership Palin envisions would include Enstar, which is a proven operator, and ANGDA, a state authority that has bonding capability and can provide public financing. The state has the ability to expedite the project and help ensure lower transportation rates (or tariffs) on an in-state pipeline, Palin said in a written statement.

Construction of this gas line project would start in the south and progress north, the statement said. In the plan being considered, the first phase, connecting Cook Inlet with Fairbanks and Interior Alaska, could be built by 2013.

"Over the next five years, the state hopes to see new discoveries of natural gas within the Cook Inlet basin and along the in-state pipeline's corridor. If not, the project's second phase could continue building the line north to access gas supplies in the North Slope Foothills or beyond, making them available to Interior and Southcentral Alaska by 2014. If phase two is not needed, the in-state line could be connected to the main North Slope line when it is completed around 2018 to 2020," the governor said in her statement.

"Cook Inlet natural gas is stranded, with this significant resource potential stifled by the relatively small potential for market expansion in Southcentral Alaska. With this venture, the state will link Cook Inlet gas resources to an expanding market, creating incentives for explorers to invest in finding more natural gas in Cook Inlet," Palin said.

The venture is in the initial stages and the details will take the next few months to develop, Palin said in her statement. Coordinated fieldwork should begin next spring. Engineering and permitting work would then begin in the next two years, with the goal of starting construction in 2011, and starting gas flowing by 2013.

Palin said Enstar is also prepared to partner with the state gas development authority and the state to evaluate the project and the route believed to be the best for the state, the Richardson Highway route.

"The state of Alaska has a public interest in reaching the populations, communities, and military and industrial facilities along the Richardson Highway," Palin said in her statement. "As a resource owner in the Copper River Valley, the state also has a significant interest in promoting the exploration and development of natural gas in that basin. Enstar envisions its role in this partnership as engineering, constructing, operating, and maintaining the pipeline."

Tim Bradner can be reached at [email protected]">[email protected]


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