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Alaska Embarking on 'Bullet' Gasline to Take Care of its Own

July 14, 2008
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Natural gas consumers in Alaska's south-central region, where supplies have been short, got good news about future supply prospects last week when the state announced a partnership of the state with the Alaska Natural Gas Development Authority (ANGDA) and ENSTAR Natural Gas Co. to build the first phase of a bullet pipeline to serve the region.

The project would rely on ENSTAR's capability as an operator; ANGDA would provide public financing; and the state could expedite the project and possibly "ensure lower transportation rates." It could move 460 MMcf/d -- about twice the current daily gas use of Alaskans -- and begin flowing gas as early as 2013, the state said.

ENSTAR has been looking at ways to get additional gas supplies in the Cook Inlet area (see NGI, Oct. 1, 2007). Producers in the region have committed to develop more local reserves in exchange for extension of a liquefied natural gas (LNG) export license (see NGI, Jan. 7). And a spur pipeline off a larger Lower 48-bound pipeline from Fairbanks to Cook Inlet now under consideration is being discussed. Lawmakers are to vote soon on whether to move forward with a Lower 48 gasline proposal submitted by TransCanada Corp. under the Alaska Gasline Inducement Act (AGIA). Producers BP and ConocoPhillips are promoting a rival project (see NGI, June 30).

The other option -- for which the state has formed the partnership -- is the bullet line to bring gas from Alaska's North Slope to Cook Inlet.

"While we have publicly been focusing our efforts on AGIA and our overland gas route to Canada and the Lower 48, we have also been working on an in-state gasline that can swiftly address the needs of interior and south-central Alaskans while we continue our progress on AGIA," said Gov. Sarah Palin. "It is time to bring together the tremendous resources we have in this state to build an in-state gasline that delivers an affordable and reliable supply of natural gas to south-central and interior Alaskans, targeting delivery within the next five years. This project will also be designed to spur exploration and development of new natural gas resources within the Cook Inlet and Copper River basins, and provide a long-term supply of natural gas for south-central and interior Alaska."

Construction of the bullet line would start in the south and work north. The first phase could leave Cook Inlet and reach Fairbanks and Interior Alaska by 2013, the state said. Over the next five years the state hopes to see new discoveries of gas within the Cook Inlet basin and along the in-state pipeline's corridor. If not, the project's second phase could continue the line north to access gas supplies in the North Slope Foothills or beyond, making them available to interior and south-central Alaska by 2014. If phase two is not needed, the in-state line could be connected to the main North Slope line when it is completed, which is expected by the state to be around 2018 to 2020.

Alaska has focused on unlocking stranded North Slope gas and getting it to market. However, Cook Inlet gas is similarly stranded, with this significant resource potential stifled by the relatively small potential for market expansion in south-central Alaska. A bullet line would link Cook Inlet gas to an expanding market, creating incentives for explorers to find more gas in Cook Inlet, the state said.

Palin's administration said it hopes to reveal the recommended structure for the project this fall and then seek legislation/appropriations during the next regular legislative session, which starts in January 2009. After that, field work could begin in the spring; engineering and permitting work would then begin in the next two years, with the goal of starting construction in 2011, and starting gas flow by 2013.

"With this partnership, we are increasing the probability that a bullet line can be built; we are increasing the speed at which it will be built; and we are ensuring that the route taken will maximize benefits to Alaskans," Palin said.

Palin used the bullet line partnership announcement to highlight her energy plan, which is intended to address the high energy prices Alaskans are facing. The plan's components are immediate short-term relief, through energy rebates and state gas tax suspension plans, which are to be given to the Legislature later this week; and intermediate steps, including development of reliable energy alternatives, conservation efforts and the pursuit of an in-state gasline. Long-term plans center on AGIA and its goal of a large gasline to move North Slope gas through Alberta's AECO Hub to North American markets.

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