Persily: White House Wants Alaska Gas Line

By Dave Donaldson

The new Federal coordinator for the Alaska Natural Gas Pipeline yesterday told legislators that the White House wants to elevate the project that would  take gas from the North Slope to North American Markets – and the Obama administration is also looking for ways to be involved.   

Larry Persily advised legislators not to take action to stop the project yet.

Persily told lawmakers – and a large crowd of staff-members, lobbyists and the public – that the economic predictions on long-term market conditions, pricing and costs for natural gas are all wrong– no matter what direction those predictions take.   He says gas is part of any energy plan for the nation – and Alaska gas can be absorbed into the national supply.

Don’t give up on a big project yet.  A pipeline from the North Slope, through Alaska, through Canada,  tying into the grid that starts in Alberta that feeds gas across America from the Pacific Northwest to California, to upstate New York to the Mid-west to the Northeast.  That’s the largest gas market in the world.

He said the response to the Open Season when gas producers on the North Slope will bid on space in the line to transport their gas– set to begin in May – will determine whether the line will be built.

Persily was not supporting the state-licensed AGIA line or the BP-Conoco-Phillips line.  And since he reports directly to the White House, he is looking for results, not labels.

He addressed the market risks and arguments against the line,  saying those elements must be shared. They are complex.  For example, nationwide Gas consumption actually fell in the U-S last year.

Growth in electrical power really is the essential key to building up demand that Alaska gas can find a place in there.

The possibility of Shale gas –close to U-S markets in very large quantities — has been seen as a threat to the future of natural gas.

Shale gas is coming in many cases from new areas where there’s not the infrastructure.   In the years ahead, they’re going to need tens of Billions of dollars of new pipe to move that gas to customers.  So they also have their capital needs.

And U-S markets as well as those in the Far East are already importing Liquefied Natural Gas – to the point that projections show an oversupply in another five years.

There are a lot of supply options in the Pacific at tidewater that do not need an eight hundred mile pipeline through the Arctic to get their gas to a terminal.

Persily says these are the conditions and the forecasts the markets will have to respond to – and they must be considered.  But not until the open season is completed.

That’s the opportunity to gauge what is the market demand.  Are shippers willing to commit.  Are investors willing to sign more than one hundred Billion dollars in binding contractual agreements to use the pipeline for twenty years or more.   Certainly at some point the state, the producers, the pipeline owner, even the federal government are going to have to sit down and talk.

Kodiak Republican Alan Austerman,  the chairman of the House Fiscal Policy subcommittee,  remembers discussing the pipeline in 1995 when he was first elected.

I’m still of the same opinion  that I was back then in having this discussion with the industry at the table.  When the industry can see the profitability of natural gas flowing out of Alaska, we will have a pipeline.  And that – same thing we’re talking about today really.

Persily says there’s nothing in Washington that is stopping the project, although there are steps that could be taken there to help it.     He says the issues are in Alaska,  Texas and Canada.  And his job is to resolve them.


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