Alaska panel says state should not invest in gas pipeline project

An Alaska commission studying options for a proposed gas pipeline project has urged the state not to invest in the project. The 28-member Alaska Highway Natural Gas Policy Council issued its final report Nov. 30, after a year of hearings and discussions.

By the OGJ Online Staff

HOUSTON, Dec. 3 -- An Alaska commission studying options for a proposed gas pipeline project has urged the state not to invest in the project.

The 28-member Alaska Highway Natural Gas Policy Council issued its final report Nov. 30, after a year of hearings and discussions. Investing in the line was one of the options Gov. Tony Knowles had placed on the table for discussion.

Among its 61 recommendations, the council said the state should not directly invest in a gas pipeline project "unless there is clear evidence of economic benefits to Alaska that cannot be achieved through other regulatory mechanisms. However, we should continue to explore any means that public financing, without recourse, could play in furthering the project."

The council urged the state to retain its right to take its royalty gas in-kind from Prudhoe Bay and other North Slope fields. "Sales of [state] royalty gas to companies other than producers will foster competition, leading to greater values and more benefits to residents. Accordingly, the state is already considering a competitive sale of a portion of the state's royalty gas as early as mid-December."

The council said, "Alaska must have a role in the [federal] review and approval of tariffs and other charges affecting transportation of gas from the North Slope to Alaska communities."

And the council said state and federal agencies will need adequate funding to speed the permitting process and to perform the necessary oversight of pipeline construction and operation.

Knowles said the report urged Alaska to train its citizens for jobs needed on the gas pipeline construction project. It also recommended limiting costly laterals from the trunk line.

He said, "We know there's no better way to jump-start our nation's economy than by commercializing our huge North Slope natural gas reserves and creating thousands of good-paying jobs across scores of industries."

Knowles was not discouraged by reports that the gas pipeline is not believed to be economic at this time.

"The producers report that with their current model, they can project a return on investment of about 10-13%. That's just shy of the 15% return they say they're shooting for. This means the project is within reach. To help fill the gap, I presented testimony to Congress recommending several federal fiscal measures designed to provide more incentive for private investment in a southern route."

The governor said officials of New York City investment firms have indicated to him that financing for the line would be possible if North American gas demand continues to grow.

"All of the pieces of the puzzle for an Alaska Highway natural gas pipeline are before us. It's now up to the commercial interests to fit them together," Knowles said. "I think we're close, and I hope that all of the companies involved will continue their commitment to this process."

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