The Alaska Contractor - Summer 2008
The Alaska Contractor - Summer 2008
The Alaska Contractor - Summer 2008
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What will it take to build<br />
a gas pipeline? BY NANCY ERICKSON<br />
A<br />
menagerie of concepts and engineered drawings of<br />
a pipeline that would someday move North Slope<br />
natural gas to markets have been stacking up in<br />
corporate boardroom file cabinets for decades.<br />
Now with two proposed pipeline projects in the works,<br />
<strong>Alaska</strong>ns might just realize their long-held economic dream.<br />
But not any time soon.<br />
Both TransCanada Corp. and the combined forces of<br />
ConocoPhillips and British Petroleum have proposed similar<br />
gas lines that would stretch approximately 2,000 miles from<br />
<strong>Alaska</strong>’s Prudhoe Bay east into Canada, through the Yukon<br />
Territory and British Columbia, connecting to Alberta’s gas<br />
line grid. From there, gas could be shipped to the continental<br />
United States through existing pipelines or if needed, an additional<br />
line could be constructed extending into the Midwest.<br />
<strong>The</strong> large-diameter pipeline is estimated to move approximately<br />
4 billion cubic feet per day of natural gas to<br />
markets, about 6-8 percent of daily U.S. consumption.<br />
TransCanada was the sole successful bidder in a stateled<br />
effort to build a pipeline under Gov. Sarah Palin’s <strong>Alaska</strong><br />
Gasline Inducement Act, or AGIA, which passed the Legislature<br />
last year.<br />
<strong>The</strong> fate of its project awaits the nod of <strong>Alaska</strong> legislators<br />
who convened in a 60-day special session June 3 to consider<br />
whether to grant the Canadian pipeline company the<br />
license plus half a billion dollars in incentive cash to begin<br />
the process of taking a pipeline to fruition.<br />
<strong>The</strong> joint venture of BP and ConocoPhillips announced<br />
their Denali Pipeline Project in April and plans to spend<br />
$600 million in planning and field data collection over the<br />
next three years with the milestone of beginning an “open<br />
season” before year’s end 2010.<br />
<strong>The</strong> two oil producers hold leases on approximately twothirds<br />
of the North Slope’s prodigious 35 trillion cubic feet<br />
of gas. Exxon holds another third, with some minor holders,<br />
as well.<br />
Part of any pipeline construction, open season is a crucial<br />
process during which the pipeline company seeks customers<br />
to make long-term, firm commitments to ship their gas<br />
through the pipeline.<br />
“No shipper, there’s no pipeline. That’s the market test<br />
for the project,” said Steve Rinehart, press officer for BP Exploration<br />
in Anchorage.<br />
Executives of BP and ConocoPhillips have pledged to<br />
move forward with their $30 billion project whether or not<br />
TransCanada is issued a license to proceed.<br />
“We’re starting. We’re off,” said Rinehart. “Our train has<br />
left the station.”<br />
Company executives feel it’s worth gambling at least<br />
$600 million to bring their proposal to open season, and<br />
then to the Federal Energy Regulatory Commission, FERC.<br />
“<strong>The</strong> North American market is hungry for <strong>Alaska</strong>’s natural<br />
gas,” stated Angus Walker, a senior vice president and<br />
<br />
<br />
head of BP <strong>Alaska</strong>’s gas line team. “Our focus is on creating<br />
an efficient project at the lowest cost so as to successfully<br />
attract shippers who want to transport gas from <strong>Alaska</strong>’s<br />
North Slope to market. We believe our project offers the<br />
most promising opportunity to do that.”<br />
Can both pipeline projects move ahead? For now they<br />
can. But only one will be built. TransCanada is proceeding<br />
under AGIA with the hopes of getting state approval and the<br />
incentive cash to proceed through open season. <strong>The</strong> Denali<br />
Project is moving ahead through open season on its own.<br />
If both proposals continue beyond open season, it could<br />
put the federal regulatory commission in a position to decide<br />
which gas line project gets a certificate to build and operate,<br />
said Larry Persily, a former associate director for Oil, Gas,<br />
and Renewable Energy; Commerce and Transportation in<br />
Washington, D.C., under the Palin administration.<br />
“FERC does not want to be the decision-maker,” he<br />
said. “<strong>The</strong>y would much rather see the market decide rather<br />
than them.”<br />
Joe Balash, special assistant to Gov. Sarah Palin said the<br />
market could conceivably result in a “settlement” project that<br />
combines or merges the two applicants.<br />
“<strong>The</strong> ambivalence of FERC, combined with their desire<br />
to not decide, will put pressure on both sets of parties to<br />
resolve their differences cooperatively,” he said.<br />
Natural gas 101<br />
Natural gas is a fossil fuel often found mixed with oil<br />
and water and produced from reservoirs deep in the earth’s<br />
surface. Prudhoe Bay’s reservoir is between 8,000 feet- and<br />
9,000 feet deep, according to Rinehart.<br />
According to the Natural Gas Facts Web site, 57 percent<br />
of U.S. households heat with natural gas. It is currently the<br />
nation’s fastest growing energy source, with demand forecast<br />
to increase by approximately 22 percent by 2030.