A panel set up by Alaska Gov. Tony Knowles has recommended that the state not be among the investors in a major natural gas pipeline project from Alaska’s North Slope to markets in Canada and the Lower 48 states. However, the panel’s final report to the governor highlights the multiple benefits of the pipeline project and provides 61 recommendations on how the project should proceed.

The final report from the Alaska Highway Natural Gas Policy Council, which was delivered on Sunday to Knowles, follows a year of public hearings and discussion. It urges the state to avoid directly investing in a gas pipeline project “unless there is clear evidence of economic benefits to Alaska that cannot be achieved through other regulatory mechanisms. However, we should continue to explore any means that public financing, without recourse, could play in furthering the project.”

The council also recommends that the state retain its right to take royalty gas in-kind. “Sales of royalty gas to companies other than producers will foster competition, leading to greater values and more benefits to residents. Accordingly, the state is already considering a competitive sale of a portion of the state’s royalty gas as early as mid-December.”

The report also said Alaska would be active in the pipeline’s rate-making and added that state and federal agencies must be adequately funded to speed and assist in the permitting process and to perform the necessary oversight of pipeline construction and operation.

“We know there’s no better way to jump-start our nation’s economy than by commercializing our huge North Slope natural gas reserves and create thousands of good-paying jobs across scores of industries,” Knowles said. “The challenge is with our remote location and high cost of development and transportation, can we Alaskans be smart enough, fast enough, innovative enough to get them to market?”

Twenty-eight leaders in Alaska business, civic and government groups serve on Knowles’s gas policy council. “They’ve considered the merits of state participation as a gas line investor, how to ensure Alaskans and Alaska businesses are put to work, how to ensure access to the gas for Alaskans, and ultimately how to propel Alaska into the natural gas business,” Knowles said. “It will serve as a blueprint for achieving the interests of Alaskans as we work to move our enormous natural gas reserves to market.”

Another important conclusion by the council is that connections for gas laterals off the high-pressure pipeline will be costly and should be placed at strategic locations, Knowles noted. “To meet the clean energy needs in Fairbanks, Anchorage and other communities, spur gas pipelines from these hubs could be constructed,” he said.

“I’m a paid optimist, so I believe the opportunity to commercialize Alaska’s North Slope gas is still very much before us,” he said. “Sure, we’ve seen media reports suggesting that commercializing Alaska’s gas reserves right now is not economic. But reading below those headlines, I see good news. The producers report that with their current model, they can project a return on investment of about 10-13%. That’s just shy of the 15% return they say they are shooting for. This means the project is within reach. To help fill the gap, I presented testimony to Congress recommending several federal fiscal measures designed to provide more incentive for private investment in a southern route.”

During meetings with banking and lending institutions in New York City this week, Knowles said he was encouraged by their assessment of the likelihood of financing. North American gas demand continues to boom, they said, which likely means another dramatic rise in gas prices and continued strong demand for new sources of supply.

“All of the pieces of the puzzle for an Alaska Highway natural gas pipeline are before us. It’s now up to the commercial interests to fit them together,” Knowles said. “I think we’re close and I hope that all of the companies involved will continue their commitment to this process. Alaska is America’s energy gem. We have the oil and the gas and we want more than ever to deliver it to America and do so in a way that protects this land we all love.”

For more information on the council, and the full 155-page report, visit the Alaska Highway Natural Gas Policy Council web site: https://www.gov.state.ak.us/gascouncil/.

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