Feds: No more false starts on Alaska gas pipeline

JUNEAU, Alaska (AP) -- Federal agencies are ready to work on an Alaska liquefied natural gas project but don't want another false start, state lawmakers were told Wednesday.

In testimony submitted to the Senate Finance Committee, Larry Persily, the federal coordinator of Alaska gas pipeline projects, said agencies would like to know a project has a real shot at making it this time.

Persily said this time could well be different than past efforts, like the proposed gas line from the North Slope into Canada that has been set aside because of market changes in favor of the current project that would be capable of overseas exports.

Working in Alaska's favor is that liquefied natural gas demand is the strongest growth industry for energy in the world, he said. While the state faces a lot of potential competitors, he said it's not an impossible market.

Gas could be flowing in the next decade if markets perform as expected, the companies and state can keep costs down, and financial terms work for all parties, he said.

A project of this type carries the potential for serious risk and reward. The Alaska project has substantial advantages, like shorter tanker runs to Japan than from the Gulf Coast, but it also has substantial disadvantages, like seasonal construction limits and the fact oil and gas issues can be a hard sell amid Alaska politics, he said.

The project under consideration would feature an 800-mile pipeline. Current cost estimates for the project range from $45 billion to more than $65 billion.

The state has signed an agreement with TransCanada Corp., the Alaska Gasline Development Corp., or AGDC, and the North Slope's three major players, BP PLC, ConocoPhillips and ExxonMobil Corp., spelling out terms for pursuing the project. The agreement anticipates a state stake of about 20 to 25 percent. The state has signed a separate agreement with TransCanada for pipeline services.

The agreements are contingent upon passage of enabling legislation aimed at moving the project into a phase of preliminary engineering and design. Lawmakers have been trying to digest both the bill and the agreements, particularly the complex memorandum of understanding with TransCanada.

In the Senate Resources Committee on Wednesday, Sen. Lesil McGuire, R-Anchorage, said she didn't want the deal to fall apart but had reservations about the proposed creation of a subsidiary of AGDC to carry the state's interest in a liquefaction facility. She said she didn't want AGDC's focus on an in-state gas line to be compromised or diluted. The state has continued to pursue the smaller, in-state project through AGDC while it has pursued the big line, in case one of the projects falters.

Deputy Revenue Commissioner Mike Pawlowski said AGDC is not just about the in-state line and there is long-term strategic value in having AGDC involved in the way the bill proposes.

Sen. Hollis French, D-Anchorage, asked whether the bill, which references the oil tax law, will have any impact on the oil tax referendum later this year. A Department of Law attorney said she was not prepared to answer that question.

French, who supports the repeal effort, said later that he doesn't believe it will endanger the referendum but wanted to hear from the administration. He said he also has requested a legal opinion of his own.