All Alaska Gas Hub Proposed by Candidate for Governor Bob PoeCandidate for Alaska Governor, Bob Poe says Civil War between gas lines can be avoided and Alaskans can get gas sooner by constructing the All Alaska Gas Hub. Anchorage, Alaska, March 19,2010 -- Candidate for Governor, Bob Poe unveiled today his plan to develop an All Alaska Gas Hub in Fairbanks which he believes will get Alaska moving forward on a gas pipeline and avoid a paralyzing civil war between competing gas line concepts.
"Alaska needs a gas pipeline solution now that meets Alaska in-state gas needs, and allows for export of North Slope gas. The State of Alaska should take the lead in building a large capacity gas pipeline from the North Slope to Fairbanks creating the All Alaska Gas Hub as a central connection point for multiple gas lines in Alaska similar to the Henry Hub in Louisiana," said Poe.
"There is no single issue that will have more impact on Alaska's economic future, on in-state employment, on our kids' future, than energy security, Poe said. He continued, "very soon Alaskans will be facing a real energy crisis. Southcentral Alaska is literally running out of gas. Rural and Interior Alaskans are paying crushingly high prices for energy." "What's more, electric power generation up and down the Railbelt is at significant risk if new gas supplies don't become available as early as 2015," Poe said.
Poe continued, "When Harry Noah departed the Parnell Administration he said Alaska was wrapped around the axel on a gas pipeline and he warned of an impending civil war between Alaska politicians on which pipeline should go".
"He might be right", Poe said. "Right now politicians are lining up to support the "bullet line", or are hanging on to their support for the State's AGIA effort and the Denali Pipeline, and still others are steadfastly supporting the gas pipeline to Valdez for LNG exports, Poe said.
"But right now we have an opportunity to empower ourselves - build an All Alaska Gas Hub to Fairbanks which can accommodate each project when it is ready", Poe continued.
Poe pointed out, "The State of Alaska owns all state highways, the Marine Highway System, the Alaska Railroad, and the Railbelt (electric) Intertie. None of these provide revenue streams like an All Alaska Gas Hub would, yet all are critical to the economic vitality of the regions they serve. An All Alaska Gas Hub would simply be another state-owned transportation system, one a large majority of Alaskans want."
"Each of Alaska's competing gas lines suffers the same problem. Before any of these pipelines can deliver even an MCF of gas they each must travel 800 miles to the North Slope. Under the All Alaska Gas Hub concept, the first and toughest 400 miles are met through the State's investment making each of the competing pipelines easier to finance once they are ready", Poe said."
"Fortunately, Alaskans have been prudent, Poe said. "We have low debt, well-proven financing capabilities through AIDEA, AHFC, the Alaska Railroad and the Alaska Energy Authority, almost $34.0 billion in the Permanent Fund, $10 billion in the Constitutional Budget Reserve, and we are running a budget surplus. We can afford to invest in ourselves," Poe continued.
Poe concluded, "under a rational tax structure, gas produced and shipped from the North Slope would represent new royalty and tax revenue, as well as transportation tariff revenue to the State allowing for a reasonable payback and at the same time get Alaskans the gas we need now."
All Alaska Gas Hub Q & A
What makes this plan doable?
1. The route is well established and permitted
2. The state has the financial wherewithal and well experienced financing capabilities to put the financing together
3. The state has a lot of experience in contract management on transportation projects - we would contract with pipeline construction experts.
4. The state can take a longer investment view than the private sector, but will get paid back since it will turn gas that is not now paying revenues into a new tax stream
5. The private sector will likely want to participate to secure future tariff revenue opportunities - the state should welcome that
6. Fairbanks has been through pipeline construction before, there is a lot of related industrial capability in Fairbanks
7. Fairbanks is centrally located and well connected with the rest of the state
8. May offer an opportunity to renegotiate with AGIA license holders to avoid possible treble damages currently associated with the AGIA license
How is it different from what others are thinking?
1. Right now each group is thinking about a single project and is trying to figure out how their project can pay to go all the way to the North Slope, by taking this approach each project only needs to go to Fairbanks.
2. Others are viewing their projects as competing with other gas line projects in the state, under this approach, the All Alaska Gas Hub, would take all comers.
How will it affect my future -- or more importantly result in my getting a job here?
1. It will provide gas to Alaskans more quickly than waiting for private interests to decide the timing for Alaska.
2. It will be entirely built in Alaska under state contracting rules and would not be an interstate project so local hiring preferences may be possible
3. It will allow us to meet immediate energy needs in Interior and Southcentral Alaska to assure we have the energy we need
4. It presents a good opportunity to barge LPG gas to Western and Coastal Alaska which could lower the cost of energy and improve energy efficiency
5. It will provide future revenues to the State of Alaska to assure future services
Politically, can it be accomplished with the legislature we have now?
1. The Alaska Legislature is working hard to make a gas line possible. While it may take some members a little while to let go of their personal favorite project, once they see this approach still makes their project possible - in fact more likely - I think they will embrace it.
2. Probably the biggest challenge will be state ownership, but that is already being discussed with the All Alaska Line and the Bullet Line
What are the next steps -- and how could we accomplish this in the next two years?
1. Renegotiate AGIA
2. Appropriate funds for project design
3. Work with financing entities to develop financing options and select plan
4. Bid out work
5. Secure financing
6. Award work
7. Begin Construction
How is this financially feasible? Where will the money come from - where in the state's bank accounts will it come from? How much will it cost?
1. No one would have an exact figure until the project is designed, but general estimates are around $10.0 billion. This figure would also depend heavily on the size of the pipe.
2. The money would come from revenue bonds backed up by the full faith and credit of the state
3. The state does have significant assets including nearly $34 billion in the Permanent Fund and $10 billion in the Constitutional Budget Reserve Account. While the corpus of the Permanent Fund is protected there likely are ways to commit a portion of the earnings to support the revenue bonds if necessary. The state is also running a budget surplus which can also help cover bond payments until revenues flow from the pipeline.
How does this square with AGIA?
1. AGIA provides the licensee with guarantees including treble damages if the state supports competing projects - this will have to be renegotiated.
2. TransCanada is a very experienced pipeline builder and operator and we're going to need that, so there may be a way to re-channel their efforts to building the All Alaska Gas Hub
Under this project how would there be enough gas to accommodate every project?
1. At some point in the design phase decisions will need to be made about pipe size which will affect the amount of gas that could be delivered.
2. Financial credits could be built in to encourage proponents of the bigger lines to commit early in the project.
3. The pipeline corridor could also be constructed wider than initially necessary to accommodate expansion with a second line in the future.
Isn't this really a new name for the All Alaska Gas Line?
1. No, because this project is intended to accommodate multiple pipelines not just a single gas line solution.
2. It is true that it is an "All Alaska" solution
Why Fairbanks, why not Delta?
1. Fairbanks is the center of the state
2. All key routes for proposed pipeline projects meet in Fairbanks
3. Fairbanks has the industrial capabilities and population to support the project
4. Fairbanks already has much of the required infrastructure to support a project of this size, they've been there done that
Other projects have described "take off points" how does this concept differ from those?
1. Generally the take off points have been offered as a way to resolve other in-state gas needs, but pipelines would still have been needed to make use of the take off points. Under this proposal the take off points are centered in Fairbanks,
2. Nothing in this proposal would preclude a project from still including take off points should that make sense.
Shouldn't construction of this magnitude be done by the private sector?
1. Construction would in fact be done by the private sector, just under contract to the state in the same way as all other transportation projects are completed here.
2. But the state can't afford to wait for the private sector to make this key decision about our future. We have to make it now because Southcentral Alaska is literally running out of gas. It is time to invest in ourselves.
How would this function under state ownership?
1. I am sure that will be a subject for some debate. It could be run under state agency control, but more likely the state would contract with a private operator like Trans Canada to operate it.
Wouldn't state ownership put Alaska's regulatory functions in conflict?
1. Since almost 90 per cent of state revenue depends on the oil and gas industry now, we are already in conflict.
Who else supports this idea?
1. This project actually supports every other project, it is not in conflict with any of them, and actually makes each of them 400 miles shorter - why wouldn't other project supporters support this concept.
The All Alaska Gas Hub - Let's Empower Alaska Op-Ed
There is no single issue that will have more impact on Alaska's economic future, on in-state employment, on our kids' future, than energy security. Very soon Alaskans will be facing a real energy crisis. Southcentral Alaska is literally running out of gas. Rural and Interior Alaskans are paying crushingly high prices for energy. And, electric power generation up and down the Railbelt is at significant risk if new gas supplies don't become available as early as 2015.
The departing Parnell Administration's Pipeline Coordinator, Harry Noah, testified to a Legislative hearing last December that Alaska had become "wrapped around the axle" on a gas pipeline. He said "civil war was brewing" between Alaska politicians on which way a pipeline should go. He might be right.
Right now politicians are lining up to support the "bullet line", or are hanging on to their support for the State's AGIA effort and the Denali Pipeline, and still others are steadfastly supporting the gas pipeline to Valdez for LNG exports. But we have a moment, right now, to empower ourselves - to build an All Alaska Gas Hub to Fairbanks.
The State of Alaska should build a large capacity gas line from the North Slope to Alaska's Interior creating the All Alaska Gas Hub as a central connection point for multiple gas pipelines in Alaska like the Henry Hub in Louisiana. Why? If we did this Interior Alaskans would have easy access to gas. The hub could easily supply a "bullet line" to Southcentral Alaska, and, when export contracts are reached, could supply the "All Alaska Pipeline" to Valdez. And, shipping LPG on barges out of Nenana to Western Alaska would be possible.
Each of Alaska's competing gas lines suffers the same problem. Before any of these pipelines can deliver even an MCF of gas they each must travel 800 miles to the North Slope. Under the All Alaska Gas Hub concept, the first and toughest 400 miles are met through the State's investment, making each of the competing pipelines easier to finance once they are ready.
Since it is in Alaska's interest to see this pipeline developed now, we can afford to take the longer view. The State could also build for the future by preparing a larger pipeline corridor to allow for future expansion, and build in financial credits to the deal to encourage competing projects to move forward more quickly. Since North Slope oil producers make part of their revenue today from tariffs on TAPS, they likely will want to invest in the All Alaska Gas Hub once they believe the state is serious about making it happen.
Today the State of Alaska owns all state highways, the Marine Highway System, the Alaska Railroad, and the Railbelt (electric) Intertie. None of these provide revenue streams like an All Alaska Gas Hub would, yet all are critical to the economic vitality of the regions they serve. Why not a large capacity gas pipeline from the North Slope to an All Alaska Gas Hub, it would simply be another state-owned transportation system, and one a large majority of Alaskans want.
Fortunately, Alaskans have been prudent, saving almost $34.0 billion in the Permanent Fund and $10 billion in the Constitutional Budget Reserve. We have low debt and well-proven financing capabilities through AIDEA, AHFC, the Alaska Railroad and the Alaska Energy Authority, and today's oil prices are allowing us to run a budget surplus. Under a rational tax structure, gas produced and shipped from the North Slope would represent to the State new royalty and tax revenue, as well as transportation tariff revenue.
Now is the time Alaska, to seize our own future and to design our own destiny. Let's invest in ourselves and determine ours' and our children's bright future here by building the All Alaska Gas Hub.
Bob Poe has served four Alaska Governors in roles including Commissioner of Administration, Executive Director of Alaska's largest investment bank AIDEA, Executive Director of the Alaska Energy Authority and Deputy Commissioner of Transportation. He has worked for top international consulting companies including Price Waterhouse and Coopers & Lybrand and has led a variety of Alaska business efforts including attracting the FedEx and UPS cargo hubs to Anchorage, formation of the Alaska Heart Institute and most recently the Pegasus Aircraft Maintenance sale to NANA Development Corporation. He is currently seeking the Democratic nomination for Alaska Governor.
Posted: March 19, 2010
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