ENSTAR eyes building smaller natural gas line ________________________________________________________
newsminer.com
By Stefan Milkowski
Published Thursday, March 13, 2008
Comments JUNEAU — As Gov. Sarah Palin considers a proposal for a major natural gas pipeline from the North Slope into Canada, the Anchorage gas utility ENSTAR is looking seriously at building a much smaller line directly to Southcentral Alaska.
Company representatives told state lawmakers Wednesday they thought they could build a small pipeline from the foothills of the Brooks Range to the Anchorage area for about $3 billion and start shipping gas by 2014.
“We think we can do this project,” said Gene Dubay of Continental Energy Systems, an ENSTAR partner. “We think that this project will go forward.”
Dubay said ENSTAR was already working with Anadarko Petroleum Corp. to secure a supply of gas and with other entities to figure out how much the pipeline would cost and how it would be financed. The line would carry about half a billion cubic feet of gas per day and could be expanded in the future.
Assuming there is industrial demand for the gas within the state — in addition to residential and commercial demand — transportation costs could probably be kept to about $2 per thousand cubic feet, he said. That would keep the price of natural gas in Anchorage about the same as it is now and cut the price in Fairbanks by roughly half.
“This is great news,” Rep. Jay Ramras, R-Fairbanks, said after the company’s presentation.
Ramras uses natural gas in his Fairbanks businesses and has been tracking the issue closely. He started supporting an in-state pipeline recently because it could potentially bring gas to the Fairbanks area sooner than a pipeline through Canada.
“We’ve got to get away from being a diesel-based economy,” he said.
Natural gas is available in Fairbanks, but the market is relatively small and prices are roughly double the prices in Anchorage. The Fairbanks gas utility, Fairbanks Natural Gas, just worked out a long-term supply deal with Exxon Mobil that will allow it to bring North Slope gas to Fairbanks by truck as liquefied natural gas.
ENSTAR spelled out its plan while Palin’s administration is reviewing the proposal submitted by pipeline company TransCanada under the Alaska Gasline Inducement Act. That proposal is for a much larger pipeline that would run from the North Slope into Alberta, Canada, carry 4.5 billion cubic feet of gas per day and start shipping gas in 2017 at the earliest.
ConocoPhillips also is working on a pipeline project from the North Slope, and the Alaska Gasline Port Authority is still pushing its version of an in-state pipeline. The Alaska Natural Gas Development Authority is also studying ways to get gas to Alaskans.
On Wednesday, ENSTAR’s Curtis Thayer said his company’s proposal wouldn’t compete with a major pipeline project. ENSTAR would ideally get its gas from the foothills, he said, and not from the big North Slope fields considered under larger pipeline proposals. Thayer said Anadarko is studying the gas resource in the foothills now and is hopeful it will find enough gas to fill the line.
Palin’s special assistant, Joe Balash, said the administration is excited about ENSTAR’s proposal.
“As far as we’re concerned, it’s great,” he said after the hearing. “Getting the private sector to recognize an obvious need and opportunity — it’s wonderful.
“They are not asking the state to do anything for them — that’s even better,” he added.
Balash said he didn’t think the project would get in the way of a bigger pipeline either, and he said it could make more companies interested in drilling for gas.
He also cautioned that ENSTAR didn’t yet have a gas supply or a detailed cost estimate.
ENSTAR is pursuing the plan in response to uncertain natural gas supplies in the Cook Inlet.
The company just negotiated supply contracts with Cook Inlet producers and failed to secure enough gas to meet the expected demand of its 128,000 users, the representatives said. ENSTAR is looking to various methods of gas storage as a short-term solution and the gas pipeline as a long-term solution.
When one lawmaker asked how serious the company was about the project, Dubay said, “I don’t believe we have a choice.”
Cook Inlet producers wouldn’t commit to providing any gas past 2013, he said, and alternatives like importing natural gas or relying on a spur line from a pipeline into Canada aren’t realistic.
Running out of gas in Anchorage and having to switch to other fuels is unthinkable, he added. “You just don’t want to go there.”
Thayer said legislation last year lowering the production tax rate for gas sold instate also helped get the project moving. He said ENSTAR has already studied the section from Anchorage to Fairbanks from when it was considering building a spur line, and would just be adding the section from Fairbanks north.
The company representatives made their presentation to members of the Senate Resources Committee.
During the hearing, committee members questioned them about regulatory issues and ENSTAR’s pricing mechanisms, but also expressed excitement about the company’s pipeline proposal.
“We could still be designing a large pipeline and you could be delivering gas,” Committee chair Charlie Huggins, R-Wasilla, said during the presentation.
“Wonderful, wonderful,” he added at the end. “We want to be facilitators to your success.” |
