Northern Gas Pipelines, (Alaska Gas Pipeline, Denali - The Alaska Gas Pipeline, Mackenzie Valley Gas Pipeline, Alaska Highway Gas Pipeline, Northern Route Gas Pipeline, Arctic Gas, LNG, GTL) is your public service, objective, unbiased 1-stop-shop for Arctic gas pipeline projects and people, informal and rich with new information, updated 30 times weekly and best Northern Oil & Gas Industry Links on the Internet.  Find AAGPC, AAGSC, ANGTL, ANNGTC,  ANGDA, ANS, APG, APWG, ANGTA, ANGTS, AGPPT, ANWR, ARC, CARC, CAGPL, CAGSL, FPC, FERC, GTL, IAEE, LNG, NEB, NPA, TAGS, TAPS, NARUC, IOGCC, CONSUMER ENERGY ALLIANCE, AOGA,AOGCC, RCA and more...

2009 LINKS: FERC Reports to Congress, 1, 2, 3, 4, 5, 6, 7....; USGS Arctic Gas Estimates; MMS hearings: RDC, Our NGP, AJOC, DH, ADN, KTUU; Enstar Bullet Line: Map and News Links; ANGDA; Alaska Energy Forum; Prosperity Alaska

2008 LINKS: Shell Alaska OCS Study; Mackenzie Gas Project EIS; Join the Alaska Gas Pipeline Blog Discussion; Governor Sarah Palin's AGIA Links; 2007 ACES tax bill links; Department of Revenue 2007 ACES tax documents;  2007 ACES tax Presentations; 2007 ACES tax news; Alaska Gas Pipeline Training and Jobs; Gas Pipeline and Economic Development; Andrew Halcro; Bjørn Lomborg; FERC's Natural Gas Website Links

WASHINGTON: Alaska Natural Gas Pipeline Act; History of H.R. 4; DOE Energy Bill Position, 6-02; Daschle-Bingaman Energy Bill (Alaska, Sec. 1236 & tax credit, Sec. 2503 & H.R. 4 Conferees), Tax Credit; See amendments, "Energy Policy Act of 2002";  "Alaska Natural Gas Pipeline Act of 2001 (Draft)" & Background Paper, 8-9-01;Alaska Legislature Joint Committee position; Governor's position; Governor's 10-Point Plan; Anadarko Analysis; U.S. Senate Energy Committee Testimony, 10-2-01 - text version;  U.S. Senate Energy Committee Testimony, 9-14-00; Report on the Alaska Natural Gas Transportation Act of 1971, prepared by staff of the Federal Energy Regulatory Commission, 1-18-01

ALASKA: 1-23-03, Governor Frank Murkowski's State of the State Speech; 2002 DRAFT Recommendations to 2003 Legislature; '02 Alaska Legislation; Alaska Highway Natural Gas Pipeline Policy Council; Joint Legislative Gas Pipeline Committee; 9-01 Alaska Models: Canadian Routes, LNG, GTL; HR 4 Story; Cook Inlet Supply-Demand Report: AEDC; Commonwealth North Investigation & Our Article; Report: Backbone; Legislature Contacts; State Gas Pipeline Financing Study; 5-02 Alaska Producer Update; Kenai: "Oil & Gas Industry Issues and Activities Report, 11-02"; Alaska Oil & Gas Tax Structure; 2-27-02 Royalty Sale Background; Alaska Gas Pipeline Office opens, 7-01, and closes, 5-02; Betty Galbraith's 1997-1998 Chronology.  Our copy.

CANADA: 1-10-03, "Arctic Gas Pipeline Construction Impacts On Northern Transp."-Transport Canada-PROLOG Canada Inc.-The Van Horne Institute;Hill Times Reports, 8-30-02; 9-30-02, Cons. Info. Requirements; CBC Archives, Berger Commission; GNWT Economic Impact Study, 5-13-02; GNWT-Purvin & Gertz Study, 5-8-02; Alberta-Alaska MOU 6-02; Draft Pan- Northern Protocol for Oil and Gas Development; Yukon Government Economic Effects: 4-02 & PPT; Gas Pipeline Cooperation Plan Draft & Mackenzie Valley Environmental Impact Review Board;  Mackenzie Valley Pipeline MOU Draft, 6-01; FirstEnergy Analysis: 10-19-01; Integrated Delta Studies; National Post on Mackenzie Pipeline, 1-02;Northern Pipeline Act;  Haida Nation v. British Columbia; Indian Claims Commission; Skeena Cellulose decision -- aboriginal consultations required, 12-02; Misc. Pipeline Studies '02

COMPANIES: Alaska Gas Producers Pipeline Team Newsletter, 7-27-01; APG Newsletter: 5-02, 7-02 & 9-02; ArctiGas NEB PIP Filing Background; NRGPC Newsletter: Fall-02;  4-02 ArctiGas Reduces Field Work; BP's Natural Gas Page; Enbridge Perspective; Foothills Perspective; Williams Perspective; YPC Perspective, 7-02

 MEDIA REFERENCE: Alaska Journal of Commerce; Alaska Inc. Magazine; Anchorage Daily News; Canadian Broadcasting Corporation; Fairbanks Daily News Miner, Juneau Empire; Northern News Services; Oil & Gas Reporter; Petroleum News Alaska; Whitehorse Star, etc.

EXTENDED CONFERENCE NEWS: Alaska Support Industry Alliance, Anchorage Chamber of Commerce,  Canadian Institute, Insight Information, Inuvik Petroleum Shows, International Association of Energy Economists, Resource Development Council for Alaska, Ziff Energy Group

LEST WE FORGET!

Northern Gas Pipelines: Liquefied Natural Gas Projects (LNG)

1.  Background 

2.  Alaska Support 

3.  Status, 2001

4.  Current Events: LNG 

• 2001 News Activity
• 2002 News Activity
• 2003 News Activity

5.  Public Opinion Poll

6.  Commentary: Mead Treadwell

7.  Many other LNG opinions

1.  Background.  Phillips Petroleum Corporation launched the first U.S. LNG project with their Kenai plant (LNG: Liquefied Natural Gas, cooled to -260 and maintained under pressure with controlled release, or 'boil off' of vapors).  The plant used natural gas from the Cook Inlet fields, discovered in 1957 and providing the economic momentum for achievement of Alaska's statehood in 1959. (NGP Photo right, Phillips Alaska's Cook Inlet Operations Manager, Steven F. Arbelovsky, describes LNG process, 5-01)  So, for America in general and Alaska particularly, LNG was a proven concept.  In the mid-1970s, El Paso Natural Gas filed an application with the Federal Power Commission to provide Alaska North Slope natural gas, then amounting to 26 trillion cubic feet (TCF) of proven reserves, to Lower 48 markets.  The project envisioned moving ANS gas along a route roughly paralleling the Trans Alaska Pipeline System (TAPS), to the Valdez area, where it would be liquefied, loaded onto LNG tankers, and transported to California (i.e. which then posed no serious obstacles to LNG projects).  El Paso then proposed to employ a "displacement" scheme, whereby pipeline flow in certain East to West pipelines could be reversed, thus providing Alaska volumes to points East.  FPC Administrative Law Judge, Nahum Litt, supported El Paso only as a "back-up" to Arctic Gas' overland pipeline application on February 1, 1977.  However, on May 1 of the same year, the four FPC commissioners provided their "Recommendation to the President" in which they gave equal weight to the Arctic Gas and Alcan overland systems, effectively denying El Paso's application.

2.  Alaska Support.  El Paso's Chairman, Howard Boyd, organized a diligent public relations program in support of his application.  Retired BG John Bennett served as President of El Paso Alaska.  Messrs. Boyd and Bennett engaged in debates with Arctic and Alcan nationwide in support of their "All American" concept.  While they did not succeed in creating a foundation of national political support, they did win the Alaska public relations battle.  They successfully argued that their project would provide maximum employment and value added benefits to the State.  Governors Walter J. Hickel and William A. Egan were joined by most of Alaska's leaders in support of El Paso while groups such as the "Organization for the Management of Alaska's Resources" (now, Resource Development Council for Alaska), raised a large, donated war chest of funds and lobbied Washington D.C. and other important constituencies.

3.  Status: 2001.  Following El Paso Alaska's demise, local Alaskan and powerful "Outside" investors formed a successor group which believed that the true market for Alaska LNG would be the booming Pacific/Asia market; this project became widely known as the Trans Alaska Gas Pipeline System, or TAGS.  CSX Corporation is the largest shareholder of Yukon Pacific Corporation, successor of this project.   

For the last several years, as gas prices began to improve, several other El Paso successors have considered competitive schemes for moving gas to Asia, Mexico and other destinations.  These include:

     a.  Alaska North Slope LNG Project.  ARCO Alaska (a major North Slope gas owner, now Phillips Alaska, Inc.), Phillips Petroleum Corporation, Canada's Foothills Pipeline Ltd., and Marubeni Corporation (a major Japanese trading company), participate in a "sponsor group" dedicated to advancing a major North Slope LNG project (See Steve Alleman's 7-18 legislative testimony here). Yukon Pacific Corporation once owned about 12% of this consortium, but has withdrawn.

     b.  The Alaska Gasline Port Authority proposes a route for ANS gas terminating in Valdez, with financing provided via a municipally owned "authority", with tax free municipal bonds. The "Sponsor Group" above has considered Valdez and Nikiski areas for a terminus, were an LNG project to be viable.  6/11/01 news feature.

     c.  Cook Inlet Pipeline Terminus Group.  This group takes a 'high road' when compared with some advocate groups.  It says it is "PRO-Natural Gas Pipeline whichever routes are chosen".  That said, it convincingly argues for a terminus in the Nikiski area currently hosting Phillips' LNG plant, Agrium's fertilizer plant, BP's new GTL laboratory and Tesoro Alaska's refinery.  The "Sponsor Group" above has considered Valdez and Nikiski areas for a terminus, were an LNG project to be viable.  

     d.  North Foreland Facility and the Trans-Alaska Gas Pipeline.  Tyonek Native Corporation, on the North side of Cook Inlet from Kenai, proposes an LNG terminus at their North Foreland Port Facility, but according to the Joint Pipeline Office, the project is relatively inactive as of 7-01.

     e.  LNG advocate organizations (in addition to those above) include many local governments and non-profits, including but not necessarily limited to:  Backbone, Kenai, "Our Gas, Our Future"
 

4.  Current LNG Events: Post-2001.

2003Activity

1-11/12 Weekend Updates: Fairbanks Daily News Miner-The guy with the gas line idea, Anchorage longshoreman Scott Heyworth (NGP Photo, 5-01) has approached Gov. Frank Murkowski with the expected follow-up question after the passing of Ballot Proposition 3 in November's election.  He is seeking $2 million to fund a new Alaska Natural Gas Pipeline Authority.  This newspaper came out against the ballot measure prior to the November election. We said to vote "no," but couched it with the admission that we knew it was going to pass because, hey, Alaskans have wanted to see construction of a natural gas pipeline since they finished building the oil pipeline back in the '70s.

1-4/5 Weekend Updates:  Anchorage Daily News Editorial-It's a fair bet that a lot of Alaska voters didn't realize what they were doing when they overwhelmingly passed Prop. 3, the natural gas pipeline authority initiative. No doubt they wanted to send a strong message of support for a possible gas line, but in doing so, they authorized a risky and radical venture: giving state government the power to finance, build and operate a multibillion dollar pipeline to export liquefied natural gas.

1-2-03 Updates: 07:17 ET.  Alaska Oil & Gas Reporter, by Tim Bradner-The chief backer of a new state natural gas pipeline authority is promoting a proposed work plan for the authority with a $2 million budget, but Gov. Frank Murkowski's new administration is being noncommittal.  Scott Heyworth an Anchorage longshoreman who spearheaded the campaign for a ballot proposition creating the authority, presented his ideas to Murkowski and has met with Bill Corbus, the new Commissioner of Revenue, Heyworth said.

2002 Activity

12-7/8 Weekend Updates:   BALLOT MEASURE #3. ADN by Larry Houle (NGP Photo, 2-02)-Measure 3, the All-Alaska Gas Line Initiative that passed by a 60 percent majority, now presents state policy-makers with the decision whether to fund a state-owned Gas Development Authority. ... Measure 3 had nothing to do with the commercialization of North Slope gas to Lower 48 markets. In fact, creation of the new state-owned Gas Development Authority is now the very distraction that could kill the Alaska Highway gas pipeline project.

11-22-02 Updates: 01:15, 01:44, 13:27, 13:36 ET.     BALLOT PROPOSITION 3.   Valdez Star by Pat Lynn--In a strange turn of events, the Alaska Gasline Port Authority, which was formed to build a natural gas pipeline from the North Slope to Valdez, contributed $15,000 toward an effort to defeat that same measure at the polls Nov. 5.

11-15-02 Updates: 00:01 ET.  ALASKA LNG PROPOSAL.  Entitled, "What’s next for Ballot Measure 3?", Anchorage Chronicle Business Editor Rose Ragsdale (NGP Photo) has produced in this in-depth article outlining the possible courses of action flowing from voter approval of a state owned Authority to build and operate a gas pipeline.  "The day after the Nov. 5 election, Scott Heyworth (NGP Photo) sat down with members of Gov.-elect Frank Murkowski’s transition team," the article begins.  “It’s wasn’t anything formal, more like scribbling on cocktail napkins,” recalled Heyworth, the chief proponent of the All-Alaska Gas Line Initiative.  “My task now is to convey to the governor-elect’s transition team the important things. I wanted them to know that we are eager to work with the Murkowski administration and that we have ideas for how to proceed.”  NGP readers may download the complete article here.  Here is Scott Heyworth's Op-Ed piece also appearing in the Chronicle.  Heyworth was the chief sponsor of Ballot Measure 3.   NGP readers may review our earlier reports here, including downloads of the proposition and the law its passage approves.

11-12-02.  CBC-Whitehorse, Yukon - Alaskans have voted overwhelmingly in favour of an initiative that could be the end of any hopes for an Alaska Highway Pipeline.

11-10-02. Voice of the Times.  An all-Alaska, state-owned gas pipeline may sound good, but it would almost certainly be a financial nightmare.

11-5-02 (Election Day).  How horrified will voters be when we wake up Wednesday morning and learn that a well intended vote on an apple pie issue produced an unwanted law on Tuesday?  Ballot Proposition #3 is well intended.  Like apple pie, its steaming aroma is intoxicating.  Who could not want an Alaska gas pipeline, new jobs and new industry?  I’ll vote for that!  Unlike a piece of fresh, warm apple pie, Prop 3 offers more than meets the eye.  Those who patriotically vote for it could unknowingly be approving about 10 pages of new law that isn’t on the ballot.... (Complete editorial here.)   Here are other supporting and opposing views.

11-2/3-02.  Fairbanks Daily News Miner: ON TUESDAY, ALASKA VOTERS WILL DECIDE WHETHER TO CREATE A GOVERNMENT AGENCY TO OWN AND OPERATE A NORTH SLOPE GAS PROJECT INVOLVING LNG ... NOT CANADA.

LNG DEMAND WORKS AGAINST ALASKA'S PROPOSITION #3.  On 10-24, Jane Lee of Bloomberg News Service reported from Jakarta that Indonesia will sell LNG at prices about 25% lower than Japan is presently paying ($3.60-3.80MMBtu).  China will buy the LNG at about $2.40/MMBtu (add $.30-.40MMBtu transportation), linked to a formula based on $20Bbl oil.  A proposed Alaska Gasline Authority is on the ballot for voter approval in November.  Ballot Proposition #3 would create a government agency responsible for building and operating a gas pipeline/LNG project, adding Alaska natural gas to a growing Pacific Rim glut of new supply chasing lackluster demand.  A private sector investor, gas seller or gas buyer has yet to exhibit confidence in the economics of such an Alaska North Slope pipeline/LNG project though a majority of hopeful voters-at-large seem prepared to authorize public support for the concept.  -dh  (Further reference to Ballot Proposition #3.  Scott Heyworth's latest arguments supporting the proposition.  See today's AP story by Mary Pemberton; we first covered this story on 10-24. )

8-13-02: Anchorage Daily News, Op-Ed by Nels Anderson (Photo), Independent Party Candidate for Governor-My goal as governor will be to energize Alaska, energize our economy, energize our education system. Energize Alaska. I will introduce the necessary legislation that will expedite the construction of an all-Alaska gas pipeline (Other references). If the initiative to build an all-Alaska gas pipeline is approved, I will announce my selections to the governing board and have them begin their work as quickly as possible. Yukon Pacific Corp. demonstrated that an all-Alaska gas pipeline is feasible. The oil and gas industry will never produce our stranded North Slope gas until it is in their best interests to do so. Alaska must take its gas from the North Slope and build a gas pipeline through Alaska down to tidewater. I would like to see that gas brought down through the Railbelt and have that gas and its derivatives used to bring down the cost of energy in all of our communities in Alaska. I am concerned about Anchorage's energy needs when the gas reserves in Cook Inlet are exhausted. We need to find a long-term source of energy; the North Slope stranded gas is the answer. I will introduce legislation that will place a tax on our stranded gas on the North Slope....  (Note: Highlights of candidate's candidacy: New, undefined legislation to promote an LNG project; Gas reserves tax on industry; Cut government spending; Embrace Cremo plan; Alternative energy.  No mention of ANWR, Federal gas pipeline legislation or Alaska gas pipeline incentives.  -dh)

7-15-02: Yukon Pacific Corporation (YPC), promoter of a Trans Alaska Gas System (TAGS) and LNG project changed management last year.  YPC's Project Development Director, Ward Whitmore (NGP Photo-right), has produced a revised proposal for TAGS.  Readers will find an abstract of the new Executive Summary below.  The full Executive Summary will be provided here when it is released.  -dh

The TAGS project can be configured as a spur line from an Alaska Highway/Canadian pipeline project, or as a stand-alone project from the North Slope to Valdez.  YPC is evaluating two stand-alone configurations: a Reference Case, incorporating an enriched natural gas that provides for value added options, and a Lean Gas Case, in which the value added options are reduced or eliminated. 

The TAGS Reference Case would supply the following six markets: 7.4 MTA (million metric tons per annum) of LNG to North America; 4.7 MTA of LNG to Asia; 60,000 bpd (barrels per day) of ethane for feed to an in-state petrochemical industry; 100,000 bpd of propane as LPG to Asia; 50 mmscfd (million standard cubic feet per day) of utility grade natural gas for in-state use; and approximately 17,000 bpd of  NGL (natural gas liquids) tendered to TAPS.  The Lean Gas Case is essentially the same as the Reference Case except that the ethane and NGL are eliminated, the propane is reduced to 76,000 bpd and the LNG production is increased by approximately 1 MTA.  In both cases, the average flow of natural gas entering the TAGS pipeline on the North Slope, including fuel, is 2.2 bscfd (billion standard cubic feet per day). 

This new TAGS configuration is essentially a 12.1 MTA LNG project that generates revenues from 17.3 MTA of total hydrocarbon sales.  Additionally, the non-LNG products are extracted prior to liquefaction, thereby minimizing the size of the capital intensive liquefaction facilities.  Project revenues are further enhanced because a portion of the hydrocarbons is sold as LPG that historically has demanded a premium price relative to LNG.  

Economic analyses show that merits of both the Reference and Lean Gas cases are sufficiently strong to warrant consideration by entities interested in commercializing North Slope natural gas.  The TAGS project provides access to natural gas, LPG and/or LNG to supply energy needs within Alaska.

7-13/14-02 Weekend Updates: Sat. 13:55, 13:58.   Dillingham-Alaska Independence Party Candidate for Governor Nels Anderson (Photo) issued a press release today addressing Alaska's fiscal crisis and gas pipeline issues.  Anderson's platform involves establishment of a gas reserves tax sufficient to generate $500 million/year, offsetting half of the state's current $1 billion/year deficit.  He focuses additional attention toward support of an LNG project for movement of North Slope gas to Lower 48 and Asian markets.  Anderson said in the release that, "The Yukon Pacific Corporation demonstrated to the legislature what the All Alaska Gas Pipeline would cost and how it would be financed. YPC also identified markets that would be ready to take our gas once the All Alaska Gas Line was operational. At hearings in Juneau this spring, YPC made it clear that an All Alaska gas pipeline is not only feasible but that the entire gas pipeline could be owned by the state of Alaska."  Anderson criticized statements of several industrial and political leaders and said, "42,000 plus Alaskans signed a petition to build an All Alaska Gas Pipeline. That is now an initiative on the November ballot. If we build the All Alaska Gas Pipeline," he continued,  "we will have a project on line within seven to eight years. This would get much needed new revenue to our state treasury, employ our Alaskans, and provide a source of low cost energy to all of our communities throughout Alaska.

2-6-02:  Opinion, by Scott Heyworth-The All-Alaska route to Valdez down the existing TAPS corridor is a cheaper, quicker, more beneficial route for Alaska at about $8Billion, including that big gas conditioning plant, 3 compressor stations, pipeline, and LNG facilities/terminal in Valdez, and it needs no Federal help whatsoever.

The Citizens Initiative for the All-Alaska Gasline Friday announced they had surpassed their goal of gathering 40,000 signatures for the November 5, 2002 General Election Ballot.  In a release, the group said that this weekend it will deliver 42,105 signatures to the state Division of Elections in Anchorage. According to initiative sponsors, the Initiative creates a State Gas Authority which would oversee the construction by the private sector of a 800 mile gas pipeline parallel to the TAPS oil pipeline using the existing  corridor. The Authority would buy the gas at the wellhead, construct the pipeline and compressor stations, build an LNG facility at Anderson Bay in Valdez and ship the gas to multiple markets along the West Coast of America, the Pacific Rim and also provide in-state gas to Alaskan Residents.  Cost of the project would be about $8 Billion. The project would be financed by private investors, possibly including some percentage of ownership by the State of Alaska. The majority of the debt would be financed by long term revenue bonds issued by the Authority. By initiative law, in a section titled “Credit not Pledged to the State”, the Authority would not be indebted to the State or encumber the Permanent Fund. The gas markets would determine the project’s viability, supporters said.  (Further reference here.)

2001 Activity

10-12: ANCHORAGE DAILY NEWS, by Tony Hopfinger-After 19 years of trying to build an 800-mile pipeline to move liquefied natural gas from the North Slope to Valdez, Yukon Pacific Corp. is downsizing its staff and cutting its charismatic chief executive.  Jeff Lowenfels (NGP Photo right, left-right: Frank Peake, Vice President & General Manager, CSX Lines-Alaska, Snow, Former Governor Walter J. Hickel, and Jeff Lowenfels), Yukon Pacific Corporation President said he will leave his post today and become a part-time consultant for the Anchorage company as Yukon Pacific's work force shrinks from about a dozen positions to just a couple. ... Yukon Pacific, owned by Virginia-based transportation giant CSX Corp., has done nearly everything it can to make the multibillion-dollar project happen, he said. It secured most of the permits needed to build the pipeline, and it has received preliminary orders from some Asian gas buyers. ... Now the little company that got its start in 1982 under former Govs. Wally Hickel and Bill Egan faces a fuzzy future. It plans to relocate its downtown offices to Midtown and keep on only a few part-time engineers. Other employees are being retained as consultants.  ... "If the company is for sale, somebody could buy the permits and put the project together," said Scott Heyworth, an advocate for the LNG project.  But some analysts said the idea is too risky, even if a gas company were in charge. Low gas prices and limited markets in Asia don't support the huge upfront costs -- estimated at $8 billion to $10 billion -- that would come with an 800-mile pipeline and chilling plant to convert the gas to liquid.  "It has become incredibly obvious that there are lots of places that could get lots of gas to market at lower prices," said Roger Marks, a state petroleum economist. ... As for what's next, friends have suggested Lowenfels run for public office. He said he's keeping all options open.

9/5/01: 

7/30:  ANCHORAGE, Ak. Northern Gas Pipelines (Also, see Ben Spiess, Anchorage Daily News 7/31 review)—This morning in Anchorage, Citizens for the All-Alaskan Gasline Initiative representative Scott Heyworth announced his group’s intention to establish an Alaska Natural Gas Development Authority.  In correspondence to Alaska Lieutenant Governor Fran Ulmer, he identified three primary sponsors of the initiative, including himself, Tyrone Neel and Mike Macy.

Heyworth said the effort was modeled after Senator Robin Taylor’s proposed, SB 221.  (NGP Photo-Heyworth with poll results)  He told of public opinion research results of a poll he commissioned from Ivan Moore Research, indicating that within the Municipality of Anchorage, of 252 responses: 26.6% favored the Alaska Highway route; 63.6% favor an LNG project with the Valdez terminus; and less than 10% having no view or other opinions.

Heyworth reported he has already secured support for the initiative from the Alaska Independent Party and the Republican Moderate Party.  He expects to achieve formal support soon from the Green Party and the Libertarian Party and is soliciting support from traditional Republican and Democrat quarters.  “It is a non-partisan issue,” he said.  “This doesn’t need to be a political issue.”

Heyworth supports a pipeline routing from Prudhoe Bay to a liquefaction terminal to be constructed in the Valdez area.  From there, a fleet of ten cryogenic tankers would transport the –265 degree Fahrenheit liquefied gas to markets in Asia and perhaps the North American west coast.    (See more background on Heyworth’s efforts at "Our Gas, Our Future")  -dh        

7/27:  The Chairman of CSX Corporation gave Commonwealth North (CWN) members this morning his view of the U.S. economy, Alaska’s role in it and status of CSX –owned Yukon Pacific Corporation’s (YPC) Trans-Alaska Gas System (TAGS).  Chairman/President/CEO John Snow said the economy is the “weakest I’ve seen in 20 years…with the exception of energy,” but that, “...we see a brighter economic outlook for Alaska than for the Lower 48.”    (NGP Photo right, left-right: Frank Peake, Vice President & General Manager, CSX Lines-Alaska, Snow, Former Governor Walter J. Hickel, and Jeff Lowenfels, Yukon Pacific Corporation President; NGP Photo, below left, left-right: Lowenfels, Snow and CWN Board Chair, Nancy Bear Usera) 

The Federal Reserve’s interest rate increases prior to this year resulted in consumers buying less, Snow observed, …fewer cars and houses, which impacts corporate and industrial production.  “Even with all that, the American economy is still very strong due to our strong productivity”. The Fed’s rate reductions should again be creating better earnings in the next three quarters, he said.  Of CSX’s Alaska activity, he reported that the company is responsible for about half of the inbound containers to the state and remains committed to investments in Alaska: ports, containers, ships and rolling stock.

Paraphrasing Governor Hickel and redirecting his remarks to gas pipeline issues, Snow said, “To understand Alaska, you need to understand Asia.” . 

He said that over the years he had appreciated the Commonwealth North forum.   “Our support began with Governor Hammond appointing a blue ribbon commission co chaired by Governors Hickel and Egan.  The concept they proposed was movement of Alaska gas to Asia.”  (Note: Hickel and Egan—who is now deceased—are also cofounders of Commonwealth North.)

Snow said that since the Commission’s report, YPC has spent the intervening time productively involved in permitting the system, particularly in three categories: rights-of way, export licenses and environmental clearances.

“Thanks to the good work of Jeff Lowenfels we are very close to completing all requirements for State and Federal permitting work.” He said the concept of providing Alaska gas to Asia remains valid, serves Alaska’s interest, “has ‘Alaska’ stamped on it”, and serves the needs of the Lower 48 and the world.

“While Yukon’s TAGS project is viable and can move gas now to markets in Korea, Japan and Taiwan”, Snow said that “…if another project goes, we’re prepared to make our licenses and permits available.”

“The nature of these opportunities is that they are fleeting and can’t last forever”, he stated.  “If we don’t take advantage of this alignment of the stars, it may be a long time before such an opportunity returns.”

Then, greeted by supportive cheers and some applause, Snow asserted,  “We’ve had all the studies, reviews, analyses and legislative hearings necessary.  Never have conditions been better.  The world energy demand is outpacing supply.  The Bush administration supports energy projects.  The Alaska delegation, pound for pound, is the strongest delegation of any state in the union.” 

“We’ve gone about as far as we can go.” Snow concluded.  “It’s time for the producers, the state, the governor and legislature to seize this opportunity and commercialize North Slope gas for the benefit of citizens, the treasury and the Lower 48.  If not now, when?”

Snow then responded to questions.  Addressing current challenges, he repeated that the company had overcome the greatest obstacles, obtaining permits, and that consensus from the state and producers was needed now: “…a will to make it happen.”  He observed that some say that if the gas is not developed now, it will always be there.  “That is not an attitude Alaska should tolerate,” he said.

He said in answer to a question about state investment in a project that it could be considered but may not be necessary.  He said the important role for the state was that of a convener, or facilitator and without a will to make the project happen certain obstacles will be insurmountable.

7/18/01:  Jeff Lowenfels (Photo-right), President & CEO of Yukon Pacific Corporation (YPC: History, in progress), briefed the committee on the history and current status of the Trans-Alaska Gas System (TAGS).  He identified TAGS Permits and Authorizations, including: a "Presidential finding approving the export of gas; project-wide and site specific final EIS; 800 miles of rights-of way; DOE authorization for North Slope gas export; FERC final EIS and site license; and NPDES air permit for the Anderson Bay LNG site.  He suggested several acceptable variations of the TAGS project, including a "Y-line to Valdez from Delta Junction," in combination with an Alaska Highway project.  Lowenfels recounted advantages of an LNG project, including portability and service of multiple markets, diversity of supply, security of long term contracts and use of existing permits.  Chairman John Torgerson inquired about how the competition of new Russian Far East natural gas supplies to Asia affect the economics of Alaska LNG.  Lowenfels replied that such a project "nibbles away at Alaskan LNG opportunity" (See Russian Story in Archives, 7-13-01).  When Torgerson asked about YPC's major challenge, Lowenfels said it revolves around the producers' decision to pursue an LNG project (See Steve Alleman report below).  Torgerson asked if a commitment of the state's royalty share would be sufficient to support a TAGS project; "No," Lowenfels replied, "the state's royalty share is not enough....” Lowenfels reviewed a YPC letter given earlier to the Governor's Alaska Highway Natural Gas Policy Council.  The correspondence states that a confidential report prepared by Purvin & Gertz, Inc. (P&G), entitled "Alaskan Gas Development Strategies", provided Governor Knowles and his staff with numbers which, had they been "true numbers", might have led to another conclusion.  Natural Resources Commissioner Pat Pourchot said later that while the P&G report was considered, it was only one of a number of references considered when the Administration's routing position was adopted. (Obtain Lowenfels' PowerPoint presentation here).

7/18/01:  Phillips Petroleum Company executives Steve Alleman (photo-right) and George Findling, briefed the committee (History, in progress).  Alleman is assigned as Commercial Manager for the Alaska North Slope LNG Project, or Sponsor Group, consisting of Phillips, BP Exploration Alaska, Inc., Foothills Pipe Lines, Ltd. and Marubeni Corporation. The focus of earlier work, Alleman said, "...was to innovatively redesign a smaller, market entry project where costs could be deferred and overall risks reduced....” Alleman agreed with sentiment that "...the East Asian market is very interested in Alaska LNG."  The critical question, he said, is "Under what conditions would the market move from interest in Alaska LNG to commitment to purchase?"  Due to many LNG projects "fiercely competing" for Asian markets, Alleman concluded "Alaska is not yet cost competitive with the majority of those other LNG projects....” Alleman said that at this stage of development, the Sponsor Group is working on commercial and technical ways to reduce costs and risks, expecting to complete that work by year-end and within their $3 million budget.  He added that the Group is also "evaluating synergy around sharing facilities with a southern route, lower 48 pipeline" and indicated the Group would also "develop an overall permitting strategy for expeditiously moving forward with either the Nikiski or Anderson Bay route and site" when market conditions permit initiation of a project.  Chairman Torgerson asked if the partners in the study would be partners in a project.  Alleman said that while that issue hasn't been settled, there were a number of investment options for participants, including ownership in the pipeline, liquefaction/port facilities, LNG tankers, etc.  (Testimony available here.)

7/18/0: The Alaska Port Authority (History, in progress) was formed by Valdez, the Fairbanks North Star Borough and the North Slope Borough for the purpose of creating jobs and providing income to Alaska and her communities via a tax-exempt gas pipeline extending from Prudhoe Bay through Interior Alaska to Valdez.  Attorney Rigdon H. Boykin (NGP photo-middle), Bechtel Pipeline Project Manager Brent P. Sherfey (photo-right) and former Attorney General/Fairbanks Attorney Charlie Cole briefed the committee and were accompanied by the Authority's Vice Chairman, Dave Cobb (photo-left in jacket, with Fairbanks North Star Borough Mayor Ronda Boyles and Senator Torgerson).  Cole stated that the original concept was ownership and operation of a gas pipeline, in which revenue would be apportioned to the State (60%), to Alaskan communities (30%), and to the Port Authority (10%).  Mission would be to enable development of ANS gas to maximize benefit to all Alaskans.  Their consultants have completed cost and base case studies, leading the Authority to now conclude that supporting a “Y” line concept (connecting with an Alaska Highway project) will enhance economies of scale.   (A copy of the presentation is available here.)  In the question period, Boykin responded to Representative Ogan that the project would not be subject to FERC regulation.  Senator Pete Kelly inquired of any municipality owned interstate pipelines elsewhere, "not regulated by FERC".  Boynton said there were two small projects of which he was aware.

7/18/01:  Kenai Peninsula Borough Mayor, Dale Bagley (photo, w/ Fairbanks North Star Borough Mayor Ronda Boyles), assisted by Borough Business Development Manager, Jack Brown, briefed the committee as Chairman of the Cook Inlet Pipeline Terminus Group (History, in progress) advocating an LNG project terminating in Nikiski.  (Full presentation available here.)   He said that the "Midwest/Canadian gas pipeline is becoming more likely every day," and that "If the instate LNG pipeline is built along with the Midwest pipeline, both projects can share costs from the North Slope to Fairbanks, making both projects more economically feasible."  Representative Ogan suggested that the earlier Sponsor Group presentation sounded somewhat "pessimistic", and Bagley expressed hope that the Group will ultimately "find it economic to put LNG facilities in Kenai."

 

     6-4.    Alaska LNG Advocates release poll with favorable public opinion indications.

5.  Commentary: Mead Treadwell (Originally submitted to the Alaska Business Monthly for publication.)

North Country Strategies: Alaska Natural Gas in International Politics

"Every Which Way But Loose"

by

Mead Treadwell (NGP Photo-right) 

Remember the refrain, "Every which way but loose..."?

In Alaska, we know it well.   Our North Slope natural gas has been tugged in almost every direction since its

discovery in 1968 and completion of the TAPS oil pipeline in 1977.  But to all points of the compass, it is yet to
make a market:

Some, then and now, would take it South to tidewater to North American or Asian markets. 

Then and now, projects would take the gas Southeast, overland, via an Alaska Highway route through Canada to U.S. markets.

Others, then and now, would go East, across ANWR or the Beaufort Coast, to join McKenzie Valley pipelines for the same markets.

Some have studied going west, through the National Petroleum Reserve Alaska, to more accessible Chukchi or Bering Sea ports for LNG to Asia or North America.

Even the concept of going North, in LNG submarine tankers, has been promoted by shipbuilders in both the U.S. and Russia, under the ice to the markets of Europe.

North, South, East, West is not the whole of it.

There's down: 6000-8000 feet in the ground, where the gas produced with oil has been re-injected to provide pressure in the reservoir to promote additional oil recovery.   Some have argued all along that delaying a gas
sale helps Alaska earn more from oil.

There's also up - into space:  a few years ago Edward Teller, "father" of the hydrogen bomb, told an Anchorage audience North Slope gas should be used right where it is to power a giant laser that would reach outside the
atmosphere to knock down ballistic missiles aimed at the American homeland.  During peacetime, it was suggested, gas could be exported by wire as electricity.

The "Unsolved Mystery"

One of the great "unsolved mysteries of the Arctic," to steal polar explorer Vilhjalmur Stefansson's phrase, is whether, how, where and when this giant gas resource -the biggest in North America -- will find a market.  

And any way it goes, given the fact Alaska is surrounded by other nations, will most certainly have international aspects - supply, demand, construction materials, financing, and last but not least, politics.

That leads to a companion mystery: what strategy should the State of Alaska -and the United States-- pursue in both national politics and in international affairs to finally bring about a gas sale from Prudhoe Bay?

Blindsided in the international market

The cold truth is this: whatever strategy has been tried to date has failed.  We can't quit trying, so it would be more charitable to say Alaska's strategy to date has just not yet been successful.  But whether the target market has been North America or Asia, we seem to have been blindsided by international politics, where some other gas supply -more "economic" or not - has stepped in to fill a window in the marketplace.
  
Example one:  ANGTS

Example 1:  After President Carter overruled Alaska's preference for an all-Alaska line to tidewater in 1976, state policy fully supported Carter's choice, the Alaska Natural Gas Transportation System or ANGTS, down the
Alaska Highway through Canada.  The producers supported ANGTS, and put money in the project.

Then, as now, natural gas prices in the U.S. were high and supplies were short.   Project promoters spent hundreds of millions of dollars on engineering and permitting. 

Ultimately, ANGTS didn't help Alaska .   But it did give political "cover" to gas suppliers further south in Canada who wanted to export Alberta gas to U.S. markets, despite the opposition of Canada's more populated East.   The two "prebuild" southern legs of that project were approved, built, and remain major exporters of gas to the U.S. today, while Alaska gas remained stranded on the North Slope.

Example 2: TAGS

Example 2:  When the Alaska portion of ANGTS was delayed, and ultimately "indefinitely postponed" in the early 1980's, Governor Jay Hammond enlisted his predecessors Wally Hickel and Bill Egan, and Alaska turned to Asia with a proposal for TAGS, the Trans-Alaska Gas System.

In the beginning, the Asian market was firmly committed to nuclear power, and whether the market could support a large, new LNG Alaska project was in question.   But that changed in the early 1990's, after Chernobyl.  From
1982 through today, Japan, Korea and Taiwan made commitments to buy LNG that could support construction of at least three Alaska projects.   But Alaska wasn't one of them.

Producer economics vs. Alaska economics

Why?   The answer usually given is economics.   But it may be producer economics, and world politics, not Alaska's inherent economics.  

Ironically, many of the projects competing with Alaska in the Asian marketplace for LNG have been owned or promoted by Exxon-Mobil (Indonesia, Qatar, Yemen and Russia), Arco (now BP) in Indonesia, BP (Australia,
Indonesia, Abu Dhabi).   Combine that with longtime conflicts in the Prudhoe Bay field, where a gas sale may have posed a direct economic conflict to those producers who owned a greater share of the oil.  

The result: even today, Alaska's three major producers have never agreed to pursue the Asian market together. 

In both examples, Alaska has failed and America has failed.   Canada could be said to have gotten the better of us in the ANGTS exercise.   And a host of Asian suppliers has beat us in the TAGS exercise, possibly with the help of our own producers and our own governments.

How so?   For a time, U.S. and Alaska support for the TAGS project was strong - it was U.S. policy under Ronald Reagan to prevent Soviet Russia from fueling its military with major new oil and gas sales from places like Sakhalin Island.   Alaska was an alternative we offered to Japan.

But under President Clinton, energy security became less of an issue with Japan, Korea, Taiwan.  It has been U.S. policy under both Bush and Clinton to help post-Soviet Russia bring oil and gas to market.   Indeed, the State of Alaska itself under Governor Knowles has worked hard to support development of Sakhalin, an Alaska competitor, for the work it would provide Alaska's oilfield service industry.

During his term in the White House, Vice President Al Gore flew to Indonesia to cut the ribbon for a project to sell additional LNG to Japan, Korea and Taiwan.  And Governor Knowles did not even invite the TAGS sponsor, Yukon Pacific Corporation or the Alaska Gas Pipeline Port Authority when he made his two Asian visits in six years as Governor.   Missions like that may be perceived as a mixed message: does America and Alaska really want to sell?

Finally, while Alaska gas is big, and potentially giant in the political and economic relations of the U.S. and Japan, Korea and Taiwan, gas sales are an even bigger issue for our competition.    In Brunei and Indonesia, for
example, LNG is one of the chief sources of foreign exchange.   When our President talks with leaders in Asia, natural gas is -maybe-one of many agenda items.   When other nations show up in Tokyo or Seoul, for example,
gas sales are often the number one issue.

And progress, coming mostly from free trade agreements...

Despite our lack of success in both spheres, the North American and the Pacific, Alaska projects have made some gains in international politics in the last 20 years.

Among them:

In North America, the treaties and understandings dating back to the Carter-Trudeau years establish a kind of "safe passage" for Alaska gas through Canada.  As late as fall 2000, Canada's Prime Minister Chretien was citing those agreements during a campaign trip to Whitehorse.

We now have a Free Trade Agreement with Canada that has been followed with the North American Free Trade Agreement (NAFTA).   President George W. Bush, even before his inauguration, was talking about natural gas as a "hemispheric" resource, and any Alaska project serving North America is likely to tie into the infrastructure of Canada, the U.S. and Mexico.

Discoveries in Eastern Canada (as well as continued exploration in the west) appear to have diminished the efforts of those who opposed expanded Canadian gas exports to the U.S.   In times past, promoters of infrastructure that
would serve both Alaska and Canadian Arctic gas were up against those who said the U.S. energy policy was trying to "drain Canada first."

With Asia, the U.S.-Japan Energy Working Group established by Ronald Reagan and Japan Prime Minister Yasuhiro Nakasone in the early 1980's continues to foster freer energy trade with the U.S.

That working group promoted, and achieved, the ability to export Cook Inlet oil in the middle 1980's.  And that was followed, by Presidential approval for the export of North Slope gas in 1988, and approval by Congress, in the
early 1990's, to export North Slope oil.   For some time, America's willingness to sell in Asia was even a question.

The efforts of ANGTS and TAGS promoters to date have also educated a legion of political leaders in Canada, Japan, Korea, Taiwan, and even China about the potential of Alaska.   After group of influential Japanese diet members visited Alaska in the late 1980s, Japan's government revised its gas import projections upward.   A Japanese Diet group continued to follow Alaska issues.

Where should we go from here?   Are there lessons to be learned from 32 years of tugging that gas in different directions?    Perhaps there are.

Five suggestions to go for the prize

First, keep all our options open.  Governor Knowles has said, "My way is the highway," and given current market conditions, why not pursue the U.S. market overland?   But don't write off Asia.   That market will grow, as
will North America, and Alaska should position itself to serve both markets.  Putting the producers and the transportation companies together (ANGTS, TAGS, and the Gas Pipeline Authority) to pursue both Asia and North American markets could help avoid delay and resolve confusion.

Second, beware of the ways we've been snookered before.   Watch who owns what - and what commitments are being made elsewhere.   A "go slow" study on an Alaska project can be a smokescreen to buy more time while gas gets to the market from other areas.  Is that the case with either of the producers groups looking at Alaska projects to serve North America through Canada and LNG to Asia?   One hopes not.  But the fact these are "studies," taken independently of transportation companies, rather than active, concerted promotion begs the question.   Any state policy needs to be sure the gas is truly for sale.

In Canada, an Alaska pipeline would pay for infrastructure to get other Canadian gas to market.  The ANGTS lesson from the prebuilt legs must be kept in mind.  How can Alaska ensure we are not displaced this time?

In Asia, we need to promote U.S. LNG -independently if our producers are
conflicted.

The state of Alaska, as owners of the gas, should press its lessees - the North Slope producers - to commit a supply to the Asian market while they pursue the markets in the U.S.  That might be undue interference in the
marketplace except for one key fact:  we're an owner.   And we have the right, ultimately, to take the leases back for nonperformance in the marketplace.

Third, do what we can to make Alaska competitive.

We need to recognize that while there are fundamental differences between the two markets, success in either one will depend on economics. 

In Asia, gas is usually bought under long-term contracts.   In the U.S., gas is now sold in large part on shorter term contracts and the spot market.   

Everything Alaska does to make itself competitive, cost-wise, helps our long-term return in either market.   The state should embrace the efforts of the Alaska Gas Pipeline Port Authority.   It could mean hundreds of millions
of dollars in savings to project financing, through tax benefits.  

Fourth, be prepared for scenarios that can help Alaska gain a position in both markets.   An LNG project can serve Asia and North America (perhaps through a receiving facility being placed in Mexico.)    An overland route
could improve the economics of an add-on LNG project, or vice-versa.   ANWR or NPRA development could make even more gas available. 

Finally, keep at it.  Winning the battle to commercialize gas will mean a big prize for Alaska.  It will mean hundreds of millions of dollars per year in additional revenues, and it will make more North Slope marginal fields competitive to produce.   It will help move North America and Asia to a cleaner fuel.   And, in North America or Asia, it will make the United States a major player in energy security - something high oil prices have reminded us once again should be a concern of the United States.


Mead Treadwell
Managing Director, Institute of the North
Alaska Pacific University

Office of Gov. Walter J. Hickel, Founder
P.O. Box 101700
Anchorage, AK   99501
Telephone 907 343 2400, x2216
Fax 907 343 2211
Mobile 907 223 8128
Home 907 258 7764
www.institutenorth.org
meadwell@alaska.net

Mead Treadwell is Managing Director of the Institute of the North, founded by former Governor Walter J. Hickel at Alaska Pacific University.   He was Vice President and Treasurer of Yukon Pacific Corporation from 1982-1989,
and was executive director of the Governor's Economic Committee on North Slope Natural Gas.   Opinions expressed in this article are entirely his own.
 

Natural Gas & Oil Prices

Upcoming Conferences: IOGCC, 5/11 -13;

Newspaper Front Pages--WORLDWIDE

Our view of South Central Alaska's imminent Energy Crisis

 Linking to Us!

Founding Publisher's  2002 Editorials and 2001; magazine & newspaper articles; Seattle Chamber of Commerce Speech, 5-8-02, CBC Interview

Yours is visit # to this website.

Contact the Webmaster

Site planning: September 2000 - Site construction initiated: January 1, 2001 - Site uploaded to Internet: March 31, 2001 - Founding publisher, 09-00/1-03 and 3-08/present

© 2001-2002-2003-2004-2005-2006-2007-2008-2009 Northern Gas Pipelines 

Web pages herein are protected by the Copyright laws of the United States of America and the Internet Copyright Act.

This Website is provided as a public service.