Congressional Delegates Divided on Likelihood of Gas Pipeline

The dream of getting a gas pipeline to connect Alaska’s North Slope with the Lower 48 is an old one, and in recent years, it’s seemed closer than ever. But even as the company TransCanada works toward building a line, skepticism is mounting among some members of Alaska’s Congressional delegation that a project will happen any time soon, if at all.

It’s like Alaska’s White Whale, always just out of reach, but dominating the dreams of many: a line linking Alaska’s trillions of cubic feet of gas to Lower 48 markets.  If the Trans-Alaska Oil
Pipeline could be built, why not a gas line?  Congressman Don Young was part of the generation that got the oil pipe going… but he says a gas line isn’t going to happen.

“No.  no way.  Not gonna do it.  Gotta be within the state.”

By “within the state” Young means maybe to Fairbanks or Valdez, or even Haines.  He points to the recent collapse of the Denali Project line by BP and Conoco Phillips as evidence the market’s not there.

And he hates the plan former Governor Sarah Palin put in place, AGIA, or the Alaska Gasline Inducement Act, which puts up half a billion dollars in matching funds for the project.

“But they’re not going to build the gas line, or AGIA build the gas line, because gas is too cheap in the Lower 48.”

Young says the project had its window – years back when Frank Murkowski was governor and was dealing with the producers. Critics called his talks a give-away to the companies, and Palin and the legislature scrapped it for AGIA.

Frank’s daughter, Senator Lisa Murkowski, also believes AGIA has failed.

Like Young she’s encouraging the state to look at other options such as a line to Fairbanks that could later be lengthened if the market’s good.

“We’re now in a position where the conventional wisdom is there’s not going to be a pipeline, AGIA didn’t work, we’re going to be $500 million out and we’re no further ahead in getting Alaska’s gas to market whether it’s to the national market, the world market or the
local market.”

Murkowski says if the Lower 48 line is dead, she’s not sure what that means for the department designed to help get a gas line off the ground, the Federal Coordinator Office in Washington run by longtime Alaskan Larry Persily.

“It does cause some question as to whether well what do you do with that federal coordinator position if the direction of the line is focused elsewhere.”

But Senator Mark Begich defends the post and says it has a big role helping whatever plan emerges. He’s still bullish on a pipeline and says the demand for gas will only go up. But he warns it’s up to the state to make it real.

“We have nothing. And I think the state needs to just say, “here’s what we’re going to do,” buckle up and go. And right now they’re kind of like, I’m not sure we want to get in the car yet. Get in the car.”

Begich says the state could be hammering out fiscal terms to make the project appealing to gas producers.  The federal coordinator Larry Persily agrees. He says it’s important the state figures out who takes the financial risk, who writes the checks, and what the rewards will be.  But he warns that holding out for too good of a deal could jeopardize things.

“The pie that we’re going to split up if you will is a lot smaller with natural gas than it is with oil. Even if gas prices rebound. They’re just not as profitable per BTU as oil.  But it really comes down to whether Alaskans want a strong long term oil and gas economy.”

Persily disputes the notion a gas line is just a pipe dream.

“It may be conventional skepticism that the project is dead but I believe that’s wrong.  You look at the numbers and natural gas consumption in the US climbed last year almost 6%, hitting a new record.  Meanwhile production in Canada which is our biggest supplier, is down 15% from just 4 years ago and heading even lower.”

Regardless Persily says it’s not today’s market the producers are watching – it’s 10 or 20 years down the road.

President Obama hasn’t mentioned a gas line in recent energy speeches, but White House Deputy Assistant for Energy and Climate Policy, Heather Zichal, says don’t read too much into that.

“This gas line is too important for Alaska’s economy and for our own domestic energy supply so that we are going to as an administration keep trying to find ways to make it happen.”

When asked if there was any point when it would be time to throw in the towel, Zichal responded, “not as far as we’re concerned.”

So the project keeps moving forward, whether Alaskans believe it will happen, or not.

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