In State Gas: "A little bit of a disconnect"

(2/9/09) Lately there has been a lot of talk about an in state gas pipeline fueling Alaskan communities by 2014. Many lawmakers including the governor have mentioned it as their top legislative priority.

In her State of the State speech two weeks ago, Governor Sarah Palin stated her priority was to facilitate a an in-state line to be completed within five years. "We’re facilitating a smaller, in-state gasline with legislation we’ll hand you next month. My goal for this in-state line is completion in five years," she told Alaskans on January 22, 2009.

However after testimony in the Senate Resources Committee last week, there appears to be a major problem with the goal of gas flowing by 2014; the company that will supply the gas testified that they won't even know if there is commercial amounts of natural gas until at least 2016. 

Anadarko's Alaska public affairs manager Mark Hanley called it "a little bit of a disconnect."

“We’ve always said: Earliest gas in our opinion? About 2016. And that’s if things work well. … Things can always work well, but it’s probably going to be 2016,” Hanley told the Senate Resources Committee last Wednesday.

According to Hanley, the field Anadarko is exploring, Gubik, is made up of several different deposits instead of a large contiguous field. If they can find three decent size deposits it might work, if the geology hands them several scattered fields, it might not be economical to develop.

The pressure is growing for in state gas use with Cook Inlet supplies dwindling and predictions of a natural gas shortage staring down Southcentral consumers in 2014.

Currently their are two major natural gas pipeline proposals being worked on to ship natural gas from Alaska's North Slope through Canada to supply middle America's needs. The Denali project, which is a joint venture between BP and ConocoPhillips and the state sponsored AGIA process with TransCanada.

The Alaska Natural Gas Pipeline is estimated at a cost between $30 and $40 billion. It would be the single most expensive privately financed construction project in the history of the United States.

As a fall out of the global economic and credit crisis along with a glut of natural gas supplies in the lower 48, some experts have become skeptical of the economic viability of undertaking the worlds most expensive oil & gas project at a time when economic conditions are questionable.

This is relative to in-state gas as one of the options discussed has been a spur line off the big line to feed Fairbanks and Southcentral consumer markets.

The alternative that has quickly gained favor with lawmakers and the governor has been a bullet line proposed by Enstar Natural Gas that would feed gas from Anadarko's field in Gubik to Southcentral.  

However, there are economic concerns with the Enstar line as well. Hanley testified that gas from Gubik and shipped in the proposed bullet line would be more expensive than gas taken off a main line from the North Slope.

A bullet line to Gubik would have to factor in the cost of discovering and developing the field, a cost long since paid off in the decades since production began at Prudhoe Bay.

“Generally speaking, I would say that Prudhoe Bay gas is going to be more economic than our gas,” Hanley told committee members.

Meanwhile, Governor Palin has promised to introduce legislation to help deliver gas within five years.

Last week at a House Majority Caucus that Palin attended, she was asked by Representative Jay Ramras about the status of her legislation to facilitate the in state gas pipeline. In response, she offered no clear answer about what the legislation would include or when it would be introduced.