Persily says Alaska will have to make concessions to get gas pipeline built

ANCHORAGE - Alaskans just aren't going to rake in the big-time profits that they have from oil from large natural gas pipeline exports to the Lower 48, but they can capture a number of long-term benefits if attractive incentives to producers are provided to get a pipeline built.

"Politics and market economics are the problems here," Larry Persily, federal coordinator for the Alaska transportation project, told Alaska legislators at a hearing on Aug. 17. "AGIA (the Alaska Gasline Inducement Act) isn't going to get you a pipeline. All it gets you is the permit to build a pipeline." By virtue of AGIA, Alaskans are paying "to have a $500 million certificate hanging on the wall."

At a hearing of the Alaska Senate Resources Committee, Persily pointed out that it is not the responsibility of TransCanada PipeLines to negotiate with producers. Under AGIA, TransCanada has contracted with the state to get a certificate. "Getting a project is in the state's lap. The state is going to have to talk to producers."

A TransCanada representative testifying the day before said the pipeline had not had any producers sign up during their recent open season for the 1,715-mile, 4.5 Bcf/d gasline, which would span from a treatment plant at Prudhoe Bay to a connection with the Alberta Hub.

There are a lot of creative ways the state can cut a deal on incentives "without calling it a subsidy," Persily said. He suggested a "progressive" scheme where the state would collect less in the early years. "Look at it as a 50-year project," where the state wouldn't make as much on the first 10-20 Tcf, but would make it up on the next 60 Tcf. "There's a lot of opportunities to make money over 50 years."