September 2, 2010

Alaska Dispatch

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Arctic natural gas: an assessment

| Sep 18, 2009
It's time for an honest assessment on the prospects for bringing arctic natural gas to North American markets, and as the person whose job requires constant monitoring of all federal, state, Canadian, and stakeholder pipeline activity, I think I am uniquely qualified to offer a distilled perspective.

Over the past few days, experts and project applicants, economists and executives at the Alaska Oil & Gas Congress have all laid out their thinking.

But whether one subscribes to what was said depends on if you're a long-term or a short-term thinker.

In the short term, there might seem to be myriad reasons to be nervous about the pipeline's future, ranging from what's likely to come from open season to gas prices and reserves to congressional action on climate change and loan guarantees.

But I've learned to look beyond the immediate and keep my vision of the possible based on the long-term prospects and the longer-term realities of completing this project. And, I have to tell you the future looks bright.

Why?

Because there is and always will be consumer demand for energy. Only now, Americans are demanding that source of energy not only be reliable and steady, but we're demanding that it be clean and environmentally friendly.

That demand is not going to diminish any time soon, evident by the four global energy companies vying to build this pipeline.

I like to think of arctic natural gas as the "it" fuel of today's superstars: wind, solar, geothermal, and underground coal gasification. These sources of energy are all extremely important and their development must be encouraged. But for the foreseeable future, they cannot give America the energy security or energy independence it needs.

They do give us hope that there are many ways our energy needs can be met in the years beyond 2020, but in the context of clean, secure, available, low cost and green; natural gas is the happening source for today's and tomorrow's energy supply.

I'm reminded of that every day when I see the tourist busses that ferry people around D.C. with bus signs that say, "this bus runs on clean natural gas." Everybody wants it.

It is also true that a pipeline under construction will supply tens of thousands of good paying jobs to an American workforce that needs the work.

This week, the AFL-CIO endorsed the pipeline project in three resolutions passed at its annual convention in Pittsburgh. This kind of endorsement doesn't happen very often, but big labor gets this project.

Unions remember the workforce for the Trans Alaska Pipeline System peaked at 28,000 workers with over 70,000 jobs created between 1975 and 1978, and that was just for the construction.

This pipeline project, at its peak, will require tens of thousands of skilled workers, and this labor force must be trained, be ready to be hired, and then retained throughout the pre-construction and construction. A major focus on the training must be giving the workers job skills that can be used beyond the construction of a pipeline.

The AFL-CIO vote came just before President Barack Obama took the stage on Tuesday to celebrate the importance of the American worker. President Obama has told us that getting a natural gas pipeline built is one of his priorities and keeping in mind that this project has spanned six presidents, seven Alaska governors, and eight Canadian Prime Ministers, having the President's support is important for moving it along.

Even as American labor thumps us on the back, we know that the pipeline is every bit as much about Alaskan jobs. In order to construct a pipeline, new and necessary infrastructure must be built, and there are a number of projects to be done -- bridges, highways, airports, material sites and maintenance camps that might support thousands of workers needed to construct the pipeline.

Finally, this pipeline represents energy security for America. We know we're dependent on foreign oil, and we don't like it. So why would America walk into dependency on foreign natural gas with our eyes wide open? We have a chance to do it  differently this time, and Alaska's gas should flow to North American markets first.

In keeping our eye on the horizon and looking at the long term, I am optimistic in my assessment. This project is great for the economy, for the environment, for Alaska, and it's great for America.

With the kind of broad support we're seeing from the President, the Congress, and from labor as recently as this week, we all have reason to be optimistic that Alaska will be delivering abundant arctic natural gas to North American markets within nine years.

Drue Pearce is the Federal Coordinator for Alaska Natural Gas Transportation Projects. The Office of the Federal Coordinator was established in 2005 to expedite all activities by federal agencies with respect to the permitting and construction of a pipeline to bring North Slope gas to markets. Pearce assumed her role after Congressional confirmation in December 2006.

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Member Comments
Posted By: Brian @ 09.20.2009 5:47 AM
Sir, I believe Ms. Pearce is correct and you as well. First, if the reports are accurate, Cook Inlet’s natural gas for distribution to South Central will expire in the next couple of years. South Central will need gas. AK can stop exporting or build up reserve capacity via perceived and proposed storage facilities. Then there is the instate option of brining gas down from the Foothills or areas north of the Brooks Range. Somebody needs to be willing to sell the gas though, and you need a distribution network pipeline up and running in the next couple of years. Otherwise, if the reports are true, and the gas is running out, Russia will be importing to Nikiski or to somewhere else in the Cook Inlet provided AK permits a receiving/import regasification facility in time. Next, your conclusion on natural gas to the lower 48 is, at the best, ill advised. Whether it is Denali or TransCanada that constructs a gas line through AK and into Canada, all gas will go to the Alberta Hub. From the Alberta Hub the gas commingles and will have a final destination point in the lower 48. Canada is the #1 provider of natural gas to the U.S. Now, if we are so intent on sending LNG to the Pacific Rim in quantities that exceed that which is already exported from AK, then start thinking about a National Interest Determination– i.e., is it the U.S. best interest to export such a valuable commodity that reduces CO2 emissions by up to 50% as compared to other fossil fuels. Then think about AK’s leverage on off take points on a mainline for all of AK for North Slope gas coming down. Finally, think on a national level, big labor is supporting AK, use it to your advantage like never before.

In the end, if Congress is serious about reducing green house gas emissions, then they will see the benefits of natural gas from all sources– in the industrial base, consumer base, and transportation base like Ms. Pearce mentioned. The more natural gas the better, and Alaska is part of the solution.
Posted By: jim @ 09.19.2009 5:12 AM
Ms. Pearce:

I have long term vision too-- 20/20 hindsight going back about 30 years.

I doubt we will see a natural gas pipeline from Alaska to the Midwest market in my life, and I hope to live at least another 30 years.

I think the only entities seriously interested in purchasing Alaska natural gas are in Asia. We're already shipping liquified natural gas (to Asia, not to the United States).

I doubt it would serve the fiduciary obligations of American energy companies, to their shareholders, to risk massive funds on a highly speculative pipeline. I talked with a BP guy at their booth at the Alaska State Fair, and it seemed clear they've already ruled out Chicago as a delivery destination option-- apparently now they have backed off to Alberta.

It might serve the fiduciary obligations of energy companies to their shareholders if they could achieve a reduction of State taxes on North Slope oil production-- perhaps that will be their focus during "open season." But they probably wouldn't guarantee a gas pipeline in exchange for lower taxes, and I'm pretty sure they wouldn't agree to have their tax savings deposited in an escrow account that could only be spent on a gas line-- they'll want their tax savings to go straight to them and their shareholders' dividends, unconditionally, perhaps ending up at places like Ferrari of Houston, but I doubt they'd ever invest their lobbied savings in a gas line.

The only thing Alaska should focus on at this time is acquiring storage for imported liquified natural gas, for when we run short of our Cook Inlet reserves, which will probably happen in the next three to five years. The first day Southcentral residents run short of peak demand during a cold snap and have to turn off their heat-- then the discussion will change and become much more relevant, real, and locally focused. That is my short term vision-- the day is coming.

busy