State assails Valdez gas line idea
BY LAND OR SEA? Port authority disputes figures for trans-Canada project.
By MATT VOLZ
The Associated Press
adn.com
Published: May 17, 2006
Last Modified: May 17, 2006 at 02:49 AM
JUNEAU -- Liquefied natural gas shipped down a pipeline from Prudhoe Bay to Valdez would be worth less than the gas from Gov. Frank Murkowski's favored Alaska Highway pipeline route, state officials said Tuesday.
That's a reason why Exxon Mobil, BP and Conoco Phillips have shown scant interest in selling their North Slope gas to the Alaska Gasline Port Authority, said Murkowski petroleum consultant Pedro van Meurs.
State petroleum economist Roger Marks said the pipeline natural gas would cost $1.13 per thousand cubic feet more to produce and ship than the highway route. Plus, shipping into a competitive West Coast market instead of the Midwest would reduce the selling price by 67 cents per thousand cubic feet, Marks said.
Combined, that would make the liquefied gas project less valuable than the three companies' project by $1.80 per thousand cubic feet. The difference could add up to half a billion dollars in state revenue a year.
"There's no question it's a significant amount less," van Meurs said.
Representatives of the port authority argue that the study upon which the Murkowski administration is basing its information used the wrong cost assumptions and that its authors never contacted the port authority for information about their project.
The state is trying to kill the trans-Alaska liquefied natural gas project so it can sell state legislators on the three oil companies' pipeline project, said port authority attorney Bill Walker.
"It's just an absolute unfettered hatchet job," Walker said. "They want to plant the seeds that the party is over for LNG so the only thing left standing is the producers' (pipeline)."
Radoslav Shipkoff, a Washington-based financial adviser with Greengate LLC, said the value of the LNG project's gas falls within the margin of error of the producers' pipeline.
"It's competitive," said Shipkoff, whose firm advises the port authority.
Murkowski proposes entering into a 45-year contract with the state's three largest oil producers in hopes of building a natural-gas pipeline to Alberta and possibly as far as Chicago. The pipeline could ship 4 billion cubic feet of gas per day and cost $19 billion to build to Alberta or $27 billion to Chicago.
The port authority gas project would run 800 miles from Prudhoe Bay to Valdez, parallel to the existing trans-Alaska oil pipeline. The port authority says the line could be split at Delta Junction for a future pipeline to Canada.
The major oil companies have refused to sell their gas to the port authority. As a result, the authority has filed an antitrust lawsuit against the two companies -- BP and Exxon Mobil -- that operate the largest gas fields on the North Slope.
The port authority claims Exxon Mobil and BP are conspiring to crush competition and restrict the nation's supply of natural gas. Oral arguments are scheduled to be heard June 2 in Fairbanks.
Marks presented an overview of a study by the Petroleum Finance Corp. that assessed the port authority's pipeline proposal. Besides the lesser value of the liquefied natural gas, the study also concluded that the port authority project would not be competitive with other worldwide liquefied natural gas projects, would mean fewer jobs and could run up against national shipping laws.
"In our judgment, the LNG project is weak," Marks said.
Walker sent Murkowski a letter saying the Petroleum Finance Corp. study contained many shortcomings. The study made incorrect assumptions about the port authority's project and did not take into account a liquefied natural gas receiving facility that is under construction.
Moreover, the port authority's proposal would be in full compliance with federal shipping laws, the letter reads.
In addition to the producers' and the port authority's proposals, TransCanada has submitted a pipeline plan that is similar to the one by Exxon Mobil, Conoco Phillips and BP.
Murkowski halted negotiations last year with the port authority and TransCanada to concentrate solely on the producers' application.
The governor has dispatched Cabinet members, economists and consultants to alternately explain and pitch state lawmakers on the contract proposal he plans to ask them to ratify later this summer.
The contract overview has taken place daily in Juneau's Centennial Hall since the May 10 start of the special legislative session.
"Intuitively, I feel the port authority (project) is a big stretch," said House Majority Leader John Coghill, R-North Pole. "But I think the administration has some pretty big hurdles too."
Rep. David Guttenberg, D-Fairbanks, said he was not buying the Murkowski administration's case against the port authority. He said the controlled environment used by the governor's officers to present information is causing them to lose credibility.
"I hope we have an opportunity to hear the other side and rebuke their arguments," Guttenberg said. |
