Nikiski Top Pick For Gasline Terminal

Since natural gas was discovered on the North Slope, there’s been talk of building a pipeline to get it to market. But where should that pipeline end? Exxon, BP, ConocoPhillips, and TransCanada announced on Monday that Nikiski is their top choice for a stopping point.

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Steve Butt, the project’s senior manager, says the decision came down to some pretty simple questions.

“Is it suitable for a site? Can you build it there? And can you run it there? We thought the Nikiski industrial area had the best possibility of success.”

By choosing a spot on the Kenai Peninsula, the companies could build a pipeline that passes through the Interior and Southcentral and delivers natural gas to consumers along the way. There’s access to a large population base that already has some experience with natural gas processing. And especially important, there’s plenty of space to develop industrial facilities. About 500 acres of land are needed at the pipeline’s stopping point to build a processing plant and other infrastructure.

Butt says that’s the big reason Nikiski was chosen as the lead site over Valdez — that even though Valdez already has a marine terminal, there might not be as much space to build a major LNG facility. If development at Nikiski falls through, the North Slope producers have a short list of other potential sites, but are keeping the names of those communities confidential. Valdez plans to continue pushing for its selection as a pipeline terminal.

So, Alaskans have been waiting for the development of a natural gas pipeline for years. Exactly, how big of a deal is this announcement?

“It’s not the order for steel that Alaskans want. It’s not the order for the ribbon for the groundbreaking that Alaskans want, but it’s significant,” says Larry Persily, the federal coordinator for an Alaska natural gas pipeline. “You have the four companies — with the three North Slope producers in particular — agreeing on something. That’s always news.”

Legislators from both parties and the governor have issued celebratory press releases welcoming the decision. State lawmakers who have promoted the development of a separate, smaller gasline say this could even lead to a merger of the two projects. Persily says that make sense, because the choice of Nikiski as an end point would seem to “eliminate the need for a small-volume, state-supported line going same route, same direction, same customers.” Dan Fauske, head of the Alaska Gasline Development Corporation, did not return calls to explain how this development could affect the development of a small diameter gasline.

So, instead of something meant to primarily serve Alaska utilities, there’s the potential forone single, big line that would transfer billions of cubic feet of gas every day mostly for export. It would stretch 800 miles, have five take-off points, and cost at least $45 billion.

And that price tag is still the big hurdle. Project Manager Steve Butt says that just because they have an idea of where they want to end the gasline, the North Slope producers still need to be confident the line will be profitable before they start building anything. That means knowing there’s a viable export market and knowing how much you’re going to be taxed.

“Until you really understand that fiscal structure, it’s like asking somebody to take out a 30-year mortgage on a home, but they don’t know what the interest rate is. You know, we need to know those fundamental numbers so that as we move forward, everybody can have confidence that it makes sense.”

Gas taxes are expected to be a marquee issue next legislative session.