It’s Time to Face the Facts on Gasline Development

It’s Time to Face the Facts on Gasline Development

Anchorage, Tuesday, December 16, 2009

Today Bill Walker issued the following statement:
Governor Sean Parnell’s recently released budget includes $150 million to be divided between ExxonMobil Corporation and TransCanada as part of the AGIA 2010 open season process. According to Governor Parnell’s outgoing gas czar, Harry Noah, “The state is frozen waiting for a pipeline to the Lower 48 to happen.”

ExxonMobil just paid $41 billion to purchase the second largest shale gas company in the lower 48 which effectively doubles ExxonMobil’s gas ownership. We must stop the AGIA charade and accept the facts. Shale gas is here to stay. There will be no gas line into Canada to tie into a U.S. market that the Department of Energy describes as awash in gas for the next 100+ years.

The bullet line is not the answer. It creates no offsetting revenues for the State of Alaska to compensate for the rapidly declining revenues from TAPS. It is not economically viable as a stand alone project.

ExxonMobil has emphasized the need for additional large liquified natural gas (LNG) projects to come on line in order to keep up with worldwide LNG demand. However, during a December 14th conference call with industry analysts, ExxonMobil CEO, Rex Tillerson, said that his company has no plans to export natural gas as LNG from the U.S. Not only is it apparent that there will be no gas line to Canada to oversaturated U.S. markets, ExxonMobil, for one, has no motivation or intention to put Alaska’s gas into markets being served through its competing projects.

The North Slope oil leases require the producers to ship Alaska’s gas if there is a “reasonable expectation of profit.” If the State of Alaska takes ownership of the gas line infrastructure from Prudhoe Bay to Valdez, a lowered tariff will result in a “reasonable expectation of profit” for the producers. The line would be built and operated by the private sector but owned by the State of Alaska. It would be financed through standard project finance vehicles using revenue bonds with minimal state obligation. The All Alaska gas line/LNG project is the only option available for Alaska’s gas to reach Alaskan consumers and the same world market that ExxonMobil and the other producers are attempting to serve from other locations.

It is time Alaska has a leader with the experience, knowledge and courage to act decisively and not wait for third party companies with competing interests to determine Alaska’s future.

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