Significant change in market needed to save Alaska natural gas pipeline

WASHINGTON - The U.S. natural gas market is going to have to change dramatically for pipeline developers to salvage their plan to ship gas from Alaska to the Lower-48 states, a key federal official said on Jan. 10 at the Platts Energy Podium.

"It is going to take a big turnaround in the market, no doubt about it," Larry Persily, federal coordinator of Alaska Natural Gas Transportation Projects, said at the event in Washington, D.C.

TransCanada and ExxonMobil have been working with state and federal officials on plans to build a $40 billion, 48-inch-diameter pipeline from the North Slope to the Canadian border, where Canadian pipelines would carry gas to the Lower-48.

However, shale gas development has dampened U.S. demand for the gas, and North Slope producers BP, ConocoPhillips and ExxonMobil met with Alaska Governor Sean Parnell before the conference to discuss alternatives to the project, including a pipeline to a new liquefied natural gas (LNG) export project.

After the meeting, BP CEO Bob Dudley and ConocoPhillips CEO Jim Mulva said the LNG project seemed to be a better way to get the gas to market, casting growing doubts on the viability of the pipeline.

Persily acknowledged that the pipeline's future hinges on the producers. "It is going to take concurrence of the three producers. They are the ones that control the vast majority of the leased acreage, the production coming out of there. They are the ones that are going to have to sign 20-year firm shipping commitments on the pipeline worth more than $100 billion."

Persily said he thought the project had a 50-50 chance of being constructed by 2020. "I haven't given up on the project. ... What it would take is the companies believing the market is there at a sufficient price."

He also noted that there are key benefits to building the pipeline instead of the LNG project. The Alaska Natural Gas Pipeline Act provides federal loan guarantees for the pipeline, and $21 billion worth of guarantees are currently authorized, he said. The law also allows for accelerated depreciation for the pipeline and an enhanced oil recovery investment tax credit for the gas treatment plant, which together are worth more than $1 billion in tax savings, he added.

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."

Obama tells Persily he’s backing Alaska gas line effort

In a letter delivered by Larry Persily, the federal pipeline coordinator, to the 6th Annual Alaska Oil and Gas Congress on Sept. 28, President Barack Obama applauded those in the Alaska oil and gas business who are "working hard to find answers to America's energy needs."

"In addition to energy security, the pipeline would provide short and long-term economic benefits far beyond the tens of thousands of construction jobs it would create," Obama wrote. "The Nation's electrical utilities, manufacturers, businesses and homeowners will all live better with affordable, domestic natural gas supplies. Energy is an essential part of America's economic stability and that is where the gas line comes into play, bringing more than $10 billion worth of domestic natural gas a year to the Lower 48 states at projected future prices."

Obama tells Persily he’s backing Alaska gas line effort

In a letter delivered by Larry Persily, the federal pipeline coordinator, to the 6th Annual Alaska Oil and Gas Congress on Sept. 28, President Barack Obama applauded those in the Alaska oil and gas business who are "working hard to find answers to America's energy needs."

"In addition to energy security, the pipeline would provide short and long-term economic benefits far beyond the tens of thousands of construction jobs it would create," Obama wrote. "The Nation's electrical utilities, manufacturers, businesses and homeowners will all live better with affordable, domestic natural gas supplies. Energy is an essential part of America's economic stability and that is where the gas line comes into play, bringing more than $10 billion worth of domestic natural gas a year to the Lower 48 states at projected future prices."

Obama to back Alaska's effort to build gas line from North Slope

JUNEAU, Alaska - President Barack Obama plans to boost the effort to develop Alaska's natural gas resources into the executive office of the White House, according to Alaska legislators who visited Washington to discuss energy issues with other legislators.
Sen. Mark Begich, D-Alaska, has nominated legislative aide Larry Persily for the Obama appointment as federal coordinator for Alaska development. Persily has support from Sen. Lisa Murkowski, R-Alaska, as well.
He is now awaiting confirmation by the Senate, after having been approved by the Senate Energy Committee.
Senate Majority Leader Johnny Ellis, D-Anchorage, said a top Obama administration official, former Alaskan Pete Rouse, told Alaska legislators in Washington that Obama would be more than just verbally supporting the Alaska natural gas pipeline.
"Mr. Rouse said the president was planning to elevate the Alaska gas line coordinator's office effort into the executive office of the president once Mr. Persily is in place and is official," he said.
After returning from Washington, Ellis told colleagues on the Senate floor on March 8 that Persily was likely to win confirmation and be well-placed to give Alaska's views on the gas pipeline.
Rep. Berta Gardner, D-Anchorage, said the message she and others received from the Energy Council meetings was that Obama would raise the coordinator's profile.
"They want to boost his position, get him access to an executive committee on energy issues," she said.