JUNEAU, Alaska—
On the eve of what's expected to be an intense state House debate on a proposed in-state natural gas pipeline, a group of Canadians visited Juneau to remind state officials that they're standing by to help with an alternate route through Canada. The Canadian delegates included Christia Chudczak, the assistant commissioner for the Canadian Federal Northern Pipeline Agency, and Canadian Consul Peter Taylor. They hosted a luncheon at the state Capitol to tell lawmakers Canadian authorities are willing to act quickly if the state opts to go with an old pipeline route across Canada dating back to 1977.
The 1,700-mile proposed pipeline would run from Alaska's North Slope all the way to Canada's Alberta province. It would take eight years to complete, and would cost anywhere from $30 to $40 billion.
The Canadians made this much clear: any such pipeline would only be built if private industry deemed it profitable and practical. But Chudzak told lawmakers she was prepared to act as a single point of contact to make sure that hurdles can be cleared, such as gaining the consent of the 30 indigenous tribes who live along the route.
The pipeline would be massive -- 48 inches in diameter, and capable of pushing anywhere from 4.5 to 6 billion cubic feet of natural gas through the system each day. The higher volume could only be achieved if state-of-the-art compressors are used.
The large diameter is part of what's supposed to make the economics of such a system attractive. Only by moving truly large volumes of gas from the North Slope is it possible to achieve economies of scale that allow the gas to sell at a reasonable price.
The Canadians made their offer of assistance to expedite the process just one night before a floor debate is schedule on House Bill 9. This is a measure which would see a small-diameter gasline built entirely within Alaska.
The exact nature of this in-state gasline is unclear. A current proposal backed by Rep. Mike Hawker (R-Anchorage) and House Speaker Mike Chenault (R-Nikiski) might have a diameter of just 24 inches. It could deliver North Slope natural gas down to Fairbanks, and then on to Anchorage and the Kenai Peninsula.
Opponents of the 24-inch line point out that the economics are difficult, if not totally unrealistic. A small-diameter line cannot achieve the economies of scale of a big line, and because North Slope gas is "wet gas" -- filled with liquid hydrocarbons in addition to methane -- expensive processing plants would have to be built along the way.
If that gas were only used to provide heat and electric power to a few hundred thousand Alaskans, there's a good chance it would be prohibitively expensive.
However, if an "all-Alaska" line were built with a 48-inch diameter -- and its gas were shipped to the Port of Valdez -- that would be another story, since its output could be converted into liquefied natural gas and shipped to Asian countries or possibly Australia. Theoretically, it could achieve the economies of scale needed to make it turn a profit for producers. Such a line would also bring a substantial new source of tax revenues to the State of Alaska. The problem is, there isn't yet a contract with any of those nations to sell the gas to.
There is another fly in the ointment with regard to shipping North Slope gas for use solely within the state: Cook Inlet, which may have up to 19 trillion cubic feet of undiscovered natural gas beneath it, according to a recent U.S. Geological Survey estimate.
If that estimate turns out to be right, then a small-diameter in-state pipeline from the North Slope truly doesn't make sense. Gas could be piped much more cheaply out of Cook Inlet, where a great deal of pipeline infrastructure is already in place. In addition, unlike the North Slope gas, Cook Inlet methane is known as "dry gas" since it doesn't need expensive processing plants to separate out any liquid hydrocarbons.
None of the plans before the Legislature may be viable right now, however. At current natural gas prices of about $2.20 per 1,000 cubic feet, no pipeline from the North Slope -- neither an in-state line nor one across Canada -- makes much economic sense.
According to Larry Persily, federal coordinator for Alaska natural gas transportation projects, gas would have to be at least twice as expensive as it is right now in order for producers to make money on a trans-Alaska line, or for the state to earn revenue from the gas itself.
For an in-state line, the economics are a little different. Alaska gas is separated by vast distances from the Lower 48 market. For a long time, Alaskans have been making do with relatively expensive gas from Cook Inlet at $7 or $8 per cubic foot -- three to four times the going price in the Lower 48.
More gas finds by exploratory wells in Cook Inlet could lower prices, but some critics fear that flooding Alaska with small-diameter pipeline access to 35 trillion cubic feet of North Slope gas could eliminate any incentive to drill those wells.
All these cross-currents won't stop the Alaska House from debating the wisdom of a small-diamter "bullet line" from the North Slope on Tuesday night.
Email Dan Fiorucci
