AGIA Lite: Cook Inlet Gas to Fairbanks?
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Just two day before the legislature reconvenes in Juneau to decide the fate of the AGIA license for TransCanada, Governor Palin announced a plan to address the pleas for help with in state gas use.
Dubbed AGIA Lite by the governor, the two groups who will form the partnership, Enstar and ANGDA, held a press conference that seemed long on hope but lite on the details.
The initial proposal calls for Enstar and ANGDA to begin working together immediately on designing a .460 mcf per day bullet line from Cook Inlet to Fairbanks. Project engineering and costing are scheduled to be done by January of 2009, with any enabling legislation to be presented to the legislature next session.
The aggressive timeline calls for construction to begin by 2011 and gas flowing to interior Alaska by 2013. The partnership between ANGDA and Enstar just came together within the last two weeks according to reports.
During the press conference, few answers were given to key questions. Most of the questions were answered with, "Yet to be determined" given as the response. Asked who would operate the line, what was the cost, who would finance the line and what the route would be; there were no firm answers.
And the biggest question of all drew the most curious response.
For the last few years we have seen consistent reports about natural gas supplies in southcentral diminishing beginning around 2013 and our Enstar bills have reflected the tighter supply concerns.
When asked about where the gas would come from to fill the pipeline, everyone in the room seemed to subscribe to the theory that pre-building the pipeline would stimulate gas development in Cook Inlet.
Reports have shown there is significant amount of gas in Cook Inlet that hasn't been discovered due to the economic challenges. With a small population base and a smaller industrial base, monetizing the gas once it was found has so far proven to be a barrier for companies to invest in Cook Inlet exploration.
In addition, other possible gas developments in the Copper Valley basin have been suggested as possible gas finds.
Even with that said, the prospects of financing a line based on gas yet to be discovered are questionable. During the press conference, the governor seemed to say her reading of the populist view of Alaskans would support the making a major investment in the project, which of course would allow the project to possibly be built and subsidized without being fully subscribed by gas shippers.
Enstar has already been working on a proposed bullet line that would have taken the Parks Highway and is estimated to cost $3.3 billion, but the state's preferred route is the Richardson Highway that would add an additional 80 to 90 miles and increase the cost.
In an interesting exchange, Eric Lidgi from the Petroleum News asked if anyone had held any discussions with the Cook Inlet producers, ConocoPhillips or Marathon, about the possibility of increased exploration if the bullet line was a possibility.
The answer was no.
Another interesting question came from Fairbanks.
As you've read on our website, Fairbanks North Star Borough Mayor Jim Whitaker sent a stern letter to the governor and lawmakers, warning them of legal action if the state didn't take immediate steps to remedy the growing energy crisis in Fairbanks.
Dermot Cole from the Fairbanks Daily News Miner asked about the tariff. Since Fairbanks would be the last stop on the pipeline route, we'd pay the highest tariff, how would that help us, he asked.
However if the state was to subsidize a major portion or the entire cost of the project, it would make the tariff much lower.
But this is where it gets tricky for the state.
One of Mayor Whitaker contentions in his letter was that the state was violating the equal access provisions in Alaska's constitution by providing lower cost Cook Inlet natural gas exclusively to residents of southcentral.
If the state subsidizes residents along the pipeline route up to Fairbanks with cheap gas due to the state's investment, what would stop a community that didn't benefit from the bullet line from sending the same letter and claiming the same constitutional violations?
The anouncement today is positive but as we've come to learn...the devil is always in the details. And there were very few details today.
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