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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

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Northern Gas Pipelines: Liquefied Natural Gas Projects (LNG)

Extended News: 2002

Leave gas line to private sector
COMPASS: Points of view from the community

By Larry Houle

(Published: December 8, 2002)

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. Policy-makers must be aware of the time and resources that such an investment would require as well as the significant financial risks to the state.

Alaska does not have a long-range fiscal plan. The state needs to identify new revenue sources and immediate budget reductions. This all must be done before any gas line generates revenues.

Unfortunately, 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.

Measure 3 was a cleverly crafted 11-page statute that sets up a state-owned corporation authorized to purchase permits and engineering studies that "have been pledged to the Alaska Natural Gas Development Authority." Who has pledged the permits and how much are they going to cost? One company has allegedly spent more than $100 million on permits and engineering studies for the very project identified in Measure 3.

Hopefully, Measure 3 is not just another company bailout. Alaska's past participation in government subsidies gone awry deserves mention: the Delta Barley Project, the Point Mackenzie Dairy Project, the MarkAir bailout, Alaska Seafood International, and that granddaddy of them all when the 1978 Legislature awarded a 27-year contract to the Texas-based Alaska Petrochemical Co. to sell nearly all the state's North Slope royalty oil. Three years later, a bankrupt Alaska Petrochemical walked away from its contract, still owing the state nearly $60 million.

Even if buying the permits and taking over the project were a good idea, it should be done by the private sector -- not government. People talk a lot about running government like a business, the truth is government is not a business. It has rules and regulations and procedures and public access laws that present formidable challenges when government signs on as a partner in a private venture. Speed and decisiveness are essential to running a multibillion-dollar construction job; unfortunately government is neither speedy nor decisive.

The new state-owned authority must do what at least two private sector independent groups could not do and that is acquire and sell gas; build, own, operate and transport gas to markets.

Twenty times the North Slope gas reserves are known to exist in the Pacific Rim; these reserves are at or close to tidewater and are not burdened by an 800-mile-long pipeline to get to market. Asian utility companies are not entering into long-term contracts but purchasing gas in "spot-markets" at prices close to marginal cost of production. An All-Alaskan LNG pipeline owned by the state would deliver the highest marginal-cost gas in the Pacific Rim, thereby making Alaska gas noncompetitive.

High-risk projects costing $12 billion are not financed at 100 percent as proposed in the initiative. The standard is a 30 percent owner equity contribution. Alaska's Permanent Fund becomes the only viable source for the state's owner equity.

The risks of construction cost overrun and low market prices to the state are significant. Unlike large corporations, the state does not have cash reserves for such risks. In addition, the state-owned pipeline proposed would be exempt from all local property taxes.

If the message behind the passage of Measure 3 is that the majority of Alaskans want to see a gas pipeline project succeed, then we are encouraged. If building a gas pipeline is a priority for Alaskans, the single biggest, most important thing the state can do is to create clear and predictable rules on taxes and royalties for the petroleum industry. Alaskans should demand that from their elected officials. To spend energy and resources on any other activity to promote an Alaska gas pipeline is simply wasteful.

Larry Houle is the general manager of the Alaska Support Industry Alliance, a statewide nonprofit trade association whose members derive their livelihood from Alaska's oil and gas industry.

Voice of the Times
(Published: November 10, 2002)


Gas nightmare

THE BALLOT INITIATIVE on a state-owned gas pipeline won approval by a wide margin, but we suspect many voters were unfamiliar with the measure and thought they were supporting the motherhood issue of a gas line.

The state's mainstream media reported on the state-ownership question before the election and most recommended against it as a proposed boondoggle. But the public had many more immediate problems to consider during the political season -- such as who would be the next governor -- so much of the commentary was missed by a significant portion of those who voted.

The initiative, approved 61 percent to 39 percent, would move the state toward building and owning an LNG pipeline from Prudhoe Bay to Prince William Sound, presumably Valdez. The measure was championed by an Anchorage longshoreman and political activist, Scott Heyworth.

Among the negatives of such a plan -- which include putting government into the pipeline business -- is that it would be a financial bust. It would take the liquefied gas to tidewater, where LNG tankers would carry it to market.

THE PROBLEM is that Alaska gas would compete with cheaper sources of gas around the Pacific Rim, a competition it would lose unless Alaska sold its gas below cost. That could create fiscal problems for the state unlike anything it has seen before, putting it on the road to bankruptcy.

The real market for Alaska gas, the place where it could compete successfully and earn a profit, is in the U.S. Midwest. The best and most practical way to bring North Slope gas to that market is a pipeline along the Alaska Highway and through Canada to the Midwest. That routing could also involve a spur line to Southcentral.

Unless Scott Heyworth knows something about market economics that the energy companies don't, his line to Valdez sounds good but doesn't make economic sense. The companies own most of the gas and stand to profit most if a profit can be made. But, if you believe Heyworth is onto something, we have some domed-city property to sell you; and we'll throw in a half-interest in Rampart Dam for free.

The ballot measure calls for establishment of an authority to acquire and condition the gas and build the pipeline to Prince William Sound. The project would include a spur line from Glennallen to Southcentral Alaska. It would be financed by sale of state revenue bonds to investors, though any sensible investor would undoubtedly run away from a salesman offering such bonds.

The authority would require funding from the Legislature. Let's hope common sense will prevail, that the Legislature will look at the project's economics and refuse to fund it.

An all-Alaska, state-owned gas pipeline may sound good, but it would almost certainly be a financial nightmare.



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