By Dave Donaldson
The state Senate committee looking at the state’s energy future Wednesday got a reminder from the federal pipeline coordinator: the state statute setting up a pipeline project from the North Slope to North American markets will not – by itself – bring about a gas line.
It’s going to take some more work back home.
Federal Pipeline Coordinator Larry Persily said the final decisions on a high volume gas line will be made by stakeholders in the private sector — and their decisions will be based on market economics. Discussing the Alaska Gasline Inducement Act the legislature approved in 2007, Persily updated the Senate Resources Committee on the project’s permits – along with the engineering and design work that has taken place. However, he said those are the easy parts of the job.
It’s the politics and the market economics that are the problem on this project, I believe. I guess to address AGIA, since that seems to be an issue on a lot of people’s minds – and these are of course my opinion. AGIA is never going to get you a pipeline unto itself. I think it was oversold, a little misunderstood, mistaken, misleading, pick your word. But AGIA is a path for getting a building permit for a pipeline.
Persily said the state AGIA statute does not deal with financing or with fiscal conditions that need to be settled before anyone will be willing to make long-term commitments to use the pipeline. And he said that those issues need to be discussed with possible shippers.
He also suggested that Alaskans’ expectations of wealth from taking gas to market is a destructive burden on the project.
I think Alaskans need to accept that we’re just not going to get filthy, stinkin’ rich off gas like we did oil. The money just isn’t there. We can still be wealthy, we can have a great future. But the expectations have to match economic reality.
Persily says exploring for marketable reserves of gas will help increase oil production – which is more profitable. It will also produce revenue. And it will produce natural gas energy for Alaskans to use for themselves. He said it’s in the state’s hands to make the project viable to negotiate terms that will give value to the work going on now.
Questioning the next step, Anchorage Republican Mike Hawker aligned himself with Persily.
We don’t have a viable project today and probably won’t until we sit down and negotiate with the producers, bring everyone to the table and start coming up with some alignment. Is the fiscal regime the single greatest negotiation we should be having with the producers in your opinion?
Persily agreed, saying the tax structure is the only thing over which the state has any control that could put the project over the economic hurdle and convince producers to make the needed commitments.