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A Chance to Banish the Fiscal Gap Exists Now by Strategically Seizing the Opportunity Presented by ANGDA Gas Pipeline

 By Vern C. McCorkle 

    By a referendum vote in 2002, the people of Alaska overwhelmingly mandated the creation of the Alaska Natural Gas Development Authority (ANGDA) and charged it with building a gas pipeline from Prudhoe Bay to Valdez within the trans-Alaska oil pipeline right of way.

    During the closing days of January, two applications to build gas pipelines were filed with the state: one from the big three North Slope producers (ConocoPhillips, BP Exploration (Alaska) Inc. and ExxonMobil Corp.) and the other from MidAmerica Holdings Co., a pipeline operator and gas/electrical service company that is controlled by billionaire investor Warren Buffet through his Berkshire Hathaway Inc. operation. Buffet is joined by Alaska’s Cook Inlet Region Inc. and a combine of Alaska regional corporations known as Pacific Star Energy LLC.

    The two applications are seen by those who understand such tactics as placeholders in the scheme of international energy politics. The worst of all possible scenarios for Alaska would be to simply stall any project until such time as it is more beneficial for the financial gains of the applicants, Alaska’s interests unworthy of consideration.

    While the two applications specify no timeline for gas delivery and do not in any way commit to building a pipeline, Alaskans have waited for nearly three decades to realize economic benefits from North Slope gas. In the meantime, Alaska has sunk deeper and deeper into fiscal crisis, short of money to fund most basic services that state governments are called upon to provide, such as public safety, education and general welfare.

    Permitting, planning, engineering and eventual construction envisioned by the two applicants will require another decade (at least) to implement, and the financial return offered by both is far less than what can be realized under the ANGDA project, experts agree.

    The matrix that is shown here is designed to outline primary differences between the three approaches to natural gas delivery and is based upon the latest available information from published reports, press releases and experts from all three entities.

ALASKA GAS PIPELINE PROJECT PROPOSALS COMPARED 

PROPOSALS:    ANGDA–All Alaska Pipeline BIG 3 North Slope Producers MidAmerica Energy
ROUTE Prudhoe to Valdez  Prudhoe to Alberta Canada  then on to Chicago Prudhoe to Alberta Canada  then on to Chicago
DESTINATION  U.S. West Coast, Hawaii the Orient and Asia Chicago and U.S. Midwest Chicago and U.S. Midwest
VOLUME  2.2 Bcf/day expandable to 3.0 4.5 Bcf/day expandable to 6.0 4.5 Bcf/day
PIPE DIAMETER 36-inch 52-inch 48-inch
LENGTH 800 miles 3,600 miles through Alberta, Canada and on to Chicago 2,200 miles to Alberta, Canada
RIGHT of WAY OBTAINED Yes No. Need Alaska and Canadian government and tribal rights access. Will take years to get Partial, through Trans Canada Ltd.
PERMITS GRANTED All major permits in hand now Canadian and tribal permitting. Will take three-five years, at earliest Same as Big 3 producers. Will make “go/no-go” decision by 2007
COST  $12 billion paid by revenue bonds, not state or taxpayer funds $18-20 billion, with U.S. taxpayer subsidies including Canadian and Lower 48 lines. Won’t build without $6.3 billion to Trans Canada line at Canadian border
COST per ALASKAN None Partially subsidized by U.S. taxpayers Undetermined except for U.S. taxpayer subsidies
AK JOBS DURING CONSTRUCTION PHASE 10,000 for four years Approximately 10,000 for two years and potentially some in Canadian portion and Lower 48 lines Undetermined, but mostly Canadian portion and Lower 48 lines
AK JOBS AFTER CONSTRUCTION PHASE 600 100 100
$ RETURN TO ALASKA* Up to $1.3 billion per year Up to $630 million per year if no Alaskan tax incentives Up to $630 million per year if no Alaskan tax incentives
BEGIN CONSTRUCTION 2006 No timeline and no commitment  to build without U.S. subsidies

2009-2010 only if through put agreements can be negotiated with North Slope producers
BEGIN GAS FLOW 2009 Not before 2020 Not before 2010
SOUTHCENTRAL ALASKA GAS With spur line from Glennallen to Palmer Spur line from Delta or Fairbanks, but not committed to build No present plans
COASTAL GAS Yes Not available with overland route Not available with overland route
STATUTORIAL IMPEDIMENTS None 1977 U.S./Canada treaty signed by President Carter giving Canada all gas transport rights and mandating Canadian Highway pipeline route would need to be amended.
Also Canadian Native land claims settlements must be negotiated with numerous tribal organizations

Same as Big 3 North Slope producers

 

* Estimates as of 2004.

 

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