Original article posted March 12, 2010
JUNEAU, Alaska — We'll know by mid-summer how much money it would take to build a natural gas pipeline to Fairbanks and Anchorage. But the state's new intrastate natural gas manager said a big question who'd buy much of that gas remains unanswered.
Those supporting the project want to find big industrial customers, maybe a gas-to-liquid fuel production plant near Anchorage or a gas-fed fertilizer plant on the Kenai Peninsula.
Some House leaders Thursday indicated the pipeline plan could fall short unless those big buyers line up soon.
Bob Swenson, the new manager, held only limited signs of hope at a hearing Thursday. Swenson's team is bundling permits and engineering plans in hopes of drawing pipeline builders toward what's been dubbed the “bullet line” proposal.
Beyond that, Swenson said, his team meets in late March with commercial advisers to try to figure out how to attract major customers. That could mean tax incentives or partial state equity, he told members of the House energy committee, which hosted Thursday's sometimes brutal review of major energy projects around the state.
“It's going to be a challenge,” Swenson said. He said an industrial analysis could help pin down options.
Preconstruction work for the intrastate bullet pipeline and a larger interstate option are advancing simultaneously under Gov. Sean Parnell's direction. In each case, natural gas prices would be inversely related to the pipeline's size, so proponents of the intrastate proposal see major buyers and, if possible, exporters as key.
Some lawmakers from inside and outside the committee have continued to trumpet the bullet line as the state's best option. Those on the committee used Thursday's review to further bury their spurs into Swenson, seeking more information on progress.
Rep. Jay Ramras, R-Fairbanks, ripped state natural resource directors for putting Swenson's office in the “impossible situation” of studying intrastate distribution while simultaneously pushing the international line as a preferred alternative. Ramras said state resource managers should pursue the larger project a proposed line through Canada but charged them, as he has often, of inappropriately placing a drag on the work of Swenson's office.
“You are our best hope to get gas, to change the state of Alaska for the next 50 years,” Ramras said.
Swenson said other options include exporting liquified gas from Valdez or the Cook Inlet, although some are skeptical federal regulators will let Alaska export to foreign trade partners.
Estimates in July will nail down cost estimates associated with the line, which if built would connect Alaska's gas-rich North Slope to Fairbanks and Anchorage. Early guesses place delivered prices somewhere near current gas rates in Anchorage and far less than half of Fairbanks' current rates.
50-year electric plan
The committee's review also focused on other energy projects, including a handful of major renewable projects proposed near Cook Inlet.
Electric utilities are teaming up to finance some of those projects through a joint venture. Kevin Harper, a consultant helping the Railbelt hold a lid on future electric costs, suggested the six utilities need to team up. If they don't, he said, the utilities will struggle to afford the hydroelectric dams, geothermal plants, wind farms, transmission lines and other investments needed to steer Alaska toward renewable energy and to simultaneously keep electric rates low close to 12 cents per kilowatt-hour at the wholesale level during the next 50 years, Harper said.
Harper's firm, Black & Veatch, has said the state should push hard for a major hydroelectric plant and, through smaller steps, invest in waste-fed power plants, wind projects and other work totaling $9 billion during the next five decades.
Harper said Alaska could cut 8 percent from its energy supply needs by improving energy efficiency policies within the next few years.
Rep. Carl Gatto, R-Palmer, speared Harper for excluding nuclear energy from Black & Veatch's 50-year “integrated resource plan.” Many lawmakers and Alaska communities have talked of nuclear investments, as have policymakers at the national level. Harper said the Interior and Southcentral aren't big enough to accommodate a conventional nuclear plant and said his firm felt emerging options, “while promising in our view, are not yet commercially economical.”
Gatto responded: “It is economical.”
Ramras opened Thursday's meeting by accusing Harper's firm, which also participated in a 2007 review of major natural gas pipeline planning, of bias against Swenson's intrastate bullet line project.
Rep. Charisse Millett, R-Anchorage and co-chairman of the committee, asked Harper to return and present his firm's full electric plan at another committee meeting.