I was surprised to see this as the top front page story in the Dallas paper today.
Sarah Palin's Alaska pipeline dream not yet a reality
11:16 PM CDT on Friday, September 5, 2008
By GARY JACOBSON / The Dallas Morning News
Alaska Gov. Sarah Palin boasted this week that she stood up to Big Oil in advancing a decades-old ambition to bring natural gas to the Lower 48. But experts say she'll eventually have to sit down with the oil giants if she wants her pipeline dream to become a reality.
"I fought to bring about the largest private-sector infrastructure project in North American history," Ms. Palin told delegates to the Republican National Convention. "And when that deal was struck, we began a nearly $40 billion dollar natural gas pipeline to help lead America to energy independence."
Doug Reynolds, an oil and gas economist at the University of Alaska Fairbanks, said the governor has given the natural gas pipeline project new momentum. But her deal with TransCanada Alaska Co. to build the pipeline is useless unless there is also a deal with gas-producing companies to fill it, he said.
"We don't have an agreement. We don't have anything," Dr. Reynolds said.
Irving-based ExxonMobil, Houston-based ConocoPhillips and Britain's BP, the main Alaska energy producers, have huge stakes in any natural gas pipeline from Alaska's North Slope, as do American consumers who face ever-increasing energy prices.
Michelle Foss, an energy economist with the University of Texas at Austin, says a completed gas pipeline would "change the face of energy in North America."
But, until then, there's hardball to be played in a state where oil and gas account for most of the tax revenue.
Ms. Palin has refused to commit to limits on oil and gas production tax rates. And ConocoPhillips and BP have launched a competing pipeline company, called Denali, the native name for Alaska's Mount McKinley, the highest mountain in North America.
Last month, the Federal Energy Regulatory Commission told Congress there had been "substantial progress" toward development of an Alaska natural gas pipeline. But it was "very unlikely" that more than one would be built, the report said, and the FERC suggested the commission might be the best forum for all parties to work together.
"We are ready to work with the State of Alaska, TransCanada, ConocoPhillips and BP to advance a successful gas pipeline project that provides maximum benefits to the people of Alaska, the producers, and energy consumers," ExxonMobil said in a prepared statement to The Dallas Morning News.
Ms. Palin's aides did not respond to e-mailed questions about the pipeline project.
Initial plans by TransCanada and Denali call for gas to begin flowing in about 10 years, but some experts expect it to take longer. The TransCanada proposal could handle 5 billion cubic feet of natural gas a day. The United States consumes roughly 60 billion cubic feet a day, says Jeff Share, editor of the Pipeline & Gas Journal.
Unlike oil, domestic production of natural gas is in much closer balance with domestic consumption, which can moderate price swings. New gas fields like the Barnett Shale in North Texas hold great promise for consumers and producers like XTO Energy of Fort Worth and Chesapeake Energy of Oklahoma City.
And if Dallas billionaire T. Boone Pickens is successful in selling his plan to wean the nation from foreign oil, there could be a significant increase in the demand for natural gas as a vehicle fuel, possibly pushing prices higher.
Mr. Share, who has followed the Alaskan natural gas project for more than a decade, says Ms. Palin's plan is part of an effort to redefine the long-standing balance of power between oil companies and her state to get a better deal for Alaskans.
"If it goes the way Governor Palin proposes it, then she's a genius," he said. "She would have stomped all over the major oil companies, which no one thought was possible."
But if her strategy backfires, experts said, the pipeline project could be delayed for years.
Because of the huge investments necessary, the oil companies want more assurances on future natural gas taxes. Ms. Palin's predecessor, Gov. Frank Murkowski, championed a deal that did that. But that plan was seen as a giveaway to Big Oil, and he lost to Ms. Palin in the Republican primary.
Since taking office less than two years ago, Ms. Palin has increased tax rates on current oil production, pushed through the Alaska Gasline Inducement Act, which authorized a $500 million subsidy for TransCanada, and increased pressure on ExxonMobil by revoking some undeveloped gas leases on the North Slope. ExxonMobil sued, but says it wants to settle and is continuing work in the area.
Tony Palmer, the TransCanada executive in charge of Alaska development, says his company has the right, granted through the Northern Pipeline Act of Canada, to own and operate the first natural gas pipeline through Canada for Alaskan natural gas.
In an interview, Mr. Palmer said TransCanada already holds some, but not all, of the necessary rights of way through Canada. "It's a pretty straightforward process," he said of gaining the remaining access.
Experts have estimated the project at $30 billion, but acknowledge that cost could escalate.
Completing a project of that size "is simply not going to be easy to do," said Dr. Foss, head of the UT-Austin Center for Energy Economics in Houston.
Mr. Palmer said TransCanada has the financial muscle to build the project on its own, but if producers would commit their product to the pipeline, they would also probably become part-owners. TransCanada and ConocoPhillips are partners on a separate pipeline project in Canada and the United States.
The Alaska natural gas pipeline would be a massive construction challenge, running from near Prudhoe Bay to Alberta, Canada. At 1,715 miles, it would be more than twice as long as the 800-mile Alaska oil pipeline, which was completed in 1977 and cost $8 billion. That oil pipeline crosses three mountain ranges and more than 800 rivers and streams on its route to Valdez, Alaska, where the oil is transferred to tankers.
Dr. Foss says producing the necessary pipe for the new line could require the equivalent output of every steel mill in the world for more than a year.
The path of the gas pipeline would follow the oil pipeline to near Fairbanks and then the Alaska highway into the Yukon Territory and British Columbia, to the border of Alberta, where TransCanada has existing facilities that connect to much of North America. About 750 miles would be in Alaska and the rest in Canada.
Staff writers Doug J. Swanson and Ed Timms contributed to this repo |
