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IOGCC, Utility Commission to Study Long-Term Gas Marketing Agreements

Alaska Gov. Frank Murkowski, who also chairs the Interstate Oil and Gas Compact Commission (IOGCC), said that a special task force of the commission and the National Association of Regulatory Utility Commissioners will study ways to enhance the ability of utility companies to enter long-term natural gas marketing agreements to spur development of the long-proposed Alaska natural gas pipeline.

The task force is expected to report its findings to the IOGCC by Aug. 15, Murkowski said.

"Naturally, a project of this magnitude requires a degree of predictability and financial stability not only on issues of throughput, but also long-term marketing agreements," Murkowski said of the gas pipeline. He told the IOGCC members that they should reject a "misconception" that Alaska gas would displace production from other oil and gas producing states. "That is not the case. In fact, we see the market will be able to take all the gas we can send, plus all the gas your states are producing...plus some [liquefied natural gas] LNG imports, in order to meet the market demand."

Murkowski said, "it has been clear for a number of years that natural gas is the fuel of the future...clean burning...desirable...but unfortunately, not enough to go around. While most attention on Alaska has focused on oil, our state is poised to be a significant producer of natural gas."

Murkowski noted that every day at the Prudhoe Bay oil field, Alaska produces 8.5 Bcf of gas, which is enough to meet the daily needs of California, Oregon, Washington and Utah, "but it just gets reinjected to maintain reservoir pressure and extend production of oil wells." Along with the reinjected gas, he said there also are "huge" quantities of unconventional gas in the form of methane hydrates and coalbed methane, and signs that the state's interior basins may contain significant gas.

"The problem we face is, much of Alaska's gas is far from markets and infrastructure," he said. "That's why government and industry have been working together to bring our gas to market."

Murkowski detailed the various proposed Alaska gas pipelines, including one put forth by a North Slope producer group made up of ConocoPhillips, ExxonMobil and BP, which proposes a 52-inch pipeline along the Alaska Highway to link with the Lower 48. Its initial capacity would be 4.5 Bcf/d, expandable to 5.6 Bcf/d. Another, by TransCanada Pipeline Co., proposes a 48-inch pipeline along the same route and with similar capacities, and it would negotiate to either buy producers' gas or get firm shipment commitments. Another proposal by the Alaska Gasline Port Authority proposes issuing tax-free bonds to finance an LNG line from Prudhoe to Valdez, AK where gas would be shipped by tanker to West Coast markets.

"Each proposal has its advantages and disadvantages," Murkowski said. "But we're working aggressively to get a contract for the people and legislature to consider soon," adding that he hopes that the state can get its "gas to market as early as 2012."

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