Pipeline to somewhere?

March 15, 2010:  Last week, Alaska's former United States Senator Ted Stevens weighed in on the ongoing debate over the future of Alaska's natural gas pipeline. 

In a speech to Commonwealth North, Stevens said he's come to the realization in the last six months that the natural gas market in the lower 48 is saturated and the best option for Alaska's vast amounts of natural gas is the markets in Asia.

Stevens has long supported the proposed gas line through Canada and worked hard to obtain economic incentives for the route in 2004. Over the last few years I've chronicled his frustration level at the state's inability to adopt a viable gas pipeline strategy.

Two years ago, Stevens made no secret of his dislike for AGIA. On February 19, 2008 during his annual visit to Juneau, Stevens criticized AGIA as being unrealistic.

"This will be the largest project ever financed by private capital in the history of the United States. It's not going to be government money, it's financial market money," Stevens told lawmakers. "Financing terms won't be set by the legislature, the governor or the Congress. They're going to be set by the people who manage the money."

Five months later, he suddenly embraced AGIA and encouraged lawmakers to approve the Palin/Parnell plan. 

On July 11, 2008 Stevens said "I would hope they follow the governor's lead, and get it done." Lawmakers ended up following Steven's advice and the governor's lead and today Alaskans are stuck with AGIA.

The fact that Stevens opinion has changed due to changes in global market supplies of natural gas, provides an important lesson why government has no business being in the oil & gas business; markets determine commodity destinations, not politicians or populist rhetoric.

Meanwhile, two voices worthy of listening to in this debate, have laid it out very clear and simple.

Larry Persily, recently confirmed by the U.S. Senate as the federal coordinator for the Alaska gas pipeline project, said the government can't dictate that Alaskan gas goes to Asia. "It's important to let the market have a vote," said Persily. 

Steve Porter, former Deputy Director of Revenue and the publisher of the 'Alaskan Advocate' blog, also put the latest rush to route judgement in perspective:

"The pipeline builders and the shippers have spent their entire careers on oil and gas issues and have substantial experience in modeling the economics of various pipeline scenarios and in building gas pipelines. They don’t waste their time debating the politicians about which proposal is best," Porter wrote. 

The State of Alaska can't determine the market for Alaska's gas, but it can play a role in determining the marketability of Alaska's gas.

By adopting a competitive gas tax rate and corresponding measures to ensure fiscal certainty needed by the producers to help reduce the risk of the project, we will be much closer to our elusive dream of a natural gas pipeline.

http://alaskanadvocate.blogspot.com/2010/03/which-pipeline-project-is-best.html