The Alaska Contractor - Summer 2008

What will it take to build
a gas pipeline? BY NANCY ERICKSON
A
menagerie of concepts and engineered drawings of
a pipeline that would someday move North Slope
natural gas to markets have been stacking up in
corporate boardroom file cabinets for decades.
Now with two proposed pipeline projects in the works,
Alaskans might just realize their long-held economic dream.
But not any time soon.
Both TransCanada Corp. and the combined forces of
ConocoPhillips and British Petroleum have proposed similar
gas lines that would stretch approximately 2,000 miles from
Alaska’s Prudhoe Bay east into Canada, through the Yukon
Territory and British Columbia, connecting to Alberta’s gas
line grid. From there, gas could be shipped to the continental
United States through existing pipelines or if needed, an additional
line could be constructed extending into the Midwest.
The large-diameter pipeline is estimated to move approximately
4 billion cubic feet per day of natural gas to
markets, about 6-8 percent of daily U.S. consumption.
TransCanada was the sole successful bidder in a stateled
effort to build a pipeline under Gov. Sarah Palin’s Alaska
Gasline Inducement Act, or AGIA, which passed the Legislature
last year.
The fate of its project awaits the nod of Alaska legislators
who convened in a 60-day special session June 3 to consider
whether to grant the Canadian pipeline company the
license plus half a billion dollars in incentive cash to begin
the process of taking a pipeline to fruition.
The joint venture of BP and ConocoPhillips announced
their Denali Pipeline Project in April and plans to spend
$600 million in planning and field data collection over the
next three years with the milestone of beginning an “open
season” before year’s end 2010.
The two oil producers hold leases on approximately twothirds
of the North Slope’s prodigious 35 trillion cubic feet
of gas. Exxon holds another third, with some minor holders,
as well.
Part of any pipeline construction, open season is a crucial
process during which the pipeline company seeks customers
to make long-term, firm commitments to ship their gas
through the pipeline.
“No shipper, there’s no pipeline. That’s the market test
for the project,” said Steve Rinehart, press officer for BP Exploration
in Anchorage.
Executives of BP and ConocoPhillips have pledged to
move forward with their $30 billion project whether or not
TransCanada is issued a license to proceed.
“We’re starting. We’re off,” said Rinehart. “Our train has
left the station.”
Company executives feel it’s worth gambling at least
$600 million to bring their proposal to open season, and
then to the Federal Energy Regulatory Commission, FERC.
“The North American market is hungry for Alaska’s natural
gas,” stated Angus Walker, a senior vice president and
head of BP Alaska’s gas line team. “Our focus is on creating
an efficient project at the lowest cost so as to successfully
attract shippers who want to transport gas from Alaska’s
North Slope to market. We believe our project offers the
most promising opportunity to do that.”
Can both pipeline projects move ahead? For now they
can. But only one will be built. TransCanada is proceeding
under AGIA with the hopes of getting state approval and the
incentive cash to proceed through open season. The Denali
Project is moving ahead through open season on its own.
If both proposals continue beyond open season, it could
put the federal regulatory commission in a position to decide
which gas line project gets a certificate to build and operate,
said Larry Persily, a former associate director for Oil, Gas,
and Renewable Energy; Commerce and Transportation in
Washington, D.C., under the Palin administration.
“FERC does not want to be the decision-maker,” he
said. “They would much rather see the market decide rather
than them.”
Joe Balash, special assistant to Gov. Sarah Palin said the
market could conceivably result in a “settlement” project that
combines or merges the two applicants.
“The ambivalence of FERC, combined with their desire
to not decide, will put pressure on both sets of parties to
resolve their differences cooperatively,” he said.
Natural gas 101
Natural gas is a fossil fuel often found mixed with oil
and water and produced from reservoirs deep in the earth’s
surface. Prudhoe Bay’s reservoir is between 8,000 feet- and
9,000 feet deep, according to Rinehart.
According to the Natural Gas Facts Web site, 57 percent
of U.S. households heat with natural gas. It is currently the
nation’s fastest growing energy source, with demand forecast
to increase by approximately 22 percent by 2030.