Knowles Says Economic, Political Stars Aligned for AK Gas Pipeline
Alaska Gov. Tony Knowles' State of the State address last week centered
on what could become the legacy of his administration: an 1,800-mile natural
gas pipeline to transport the state's 36 Tcf to the marketplace. With energy
prices and energy consumption bursting at the seams, Knowles is dedicating
the remainder of his term, which expires in 2003, to the gas project.
Knowles also unveiled a new five-year lease sale schedule to include
16 areawide oil and gas lease sales through 2005, removing a temporary
Outlining the state's progress since he took office six years ago, Knowles
told the state's residents in his address that the "prospect of marketing
our abundant North Slope natural gas puts Alaska on the verge of a new
era of hope and opportunity for good Alaska jobs." This year, "there's
probably more optimism about the financial future of the state" than
"I believe Alaskans can be on the working end of a shovel building
a natural gas pipeline within two years," he said. "After decades
of broken dreams, the economic and political stars are finally aligned
in our favor. Natural gas is the fuel of the 21st century. Most Alaskans
and industry experts believe the most viable project is a natural gas pipeline
from Prudhoe Bay to Fairbanks, and then along the Alaska Highway to the
energy-thirsty American market."
To "jump start" the permitting process, Knowles is requesting
$4 million from Alaska's 22nd Legislature to fund a comprehensive pipeline
coordinator's office that would streamline the work. Another part of his
pipeline package calls for legislators to establish an Alaskan Highway
route for the pipeline. He also wants the state's laws changed to allow
a special tax structure that would make the project more attractive to
"My way IS the highway," Knowles said. "Alaska's natural
gas can be the foundation of a 21st century economy of high tech resource
development, high tech manufacturing and new business growth and quality
of life based on affordable clean energy. With known and proven reserves
of up to 100 Tcf, natural gas can fuel our economy for the next 50 to 70
years, but to start this mammoth undertaking, we need a single point of
On Monday, he signed an administrative order creating his natural gas
"policy cabinet" with a State Pipeline Coordinator at the helm
who would not only coordinate the permit process, but also oversee construction
of the pipeline, which would transport gas from the North Slope to the
marketplace. "Our objective is to implement the 'one-stop shopping'
approach to maximize efficiency in processing required approvals and permits
and optimize state pipeline expertise and performance."
Commissioners from each state agency would be represented in the policy
cabinet, and each agency involved in pipeline permitting and authorization
would have a liaison officer to represent it during the coordination process.
The state's Departments of Natural Resources, Environmental Conservation,
Fish and Game, Revenue, Transportation and Public Facilities, Labor and
Workforce Development and Community and Economic Development all would
To complement the plan, Knowles has introduced legislation to amend
the state's stranded gas rules passed in 1998. The rules facilitate natural
gas commercialization to include an Alaska Highway natural gas pipeline
or a gas-to-liquids (GTL) project. The 1998 bill allowed the state to negotiate
the fiscal terms of a gas line, including a contract for payments instead
of taxes, but specifically applied to a liquefied natural gas project.
Knowles' revised legislation would expand the provisions in the stranded
gas bill to any viable project because, he said, the most promising market
for Alaska today is through a pipeline to the Midwest. And other companies
are exploring new GTL technology.
Although the Alaskan governor, who first took office in 1994, is making
the gas line the centerpiece of this year's agenda, he has long been a
pipeline advocate. In November, he said he wanted a pipeline built to follow
the Alaska Highway, saying use of the established transportation corridor
would be the easiest and least expensive way to bring gas to market. Another
plan, which Knowles thinks has too many problems, would carry gas from
Prudhoe Bay across the Beaufort Sea, through the Mackenzie River Delta
In any case, an Alaskan pipeline has industry support. Major Alaska
producers BP Amoco, Phillips Petroleum and Exxon Mobil told a Senate committee
last September that they collectively are pursuing plans to build a pipeline
to deliver North Slope natural gas to the Lower 48 states, and hope to
file an application with the Federal Energy Regulatory Commission this
year (see NGI, Sept. 18, 2000).
The three own most of the reserves in the North Slope and Prudhoe Bay
regions. Exxon Mobil has a 40% stake; BP Amoco controls 30% of the gas;
and Phillips Alaska estimates it controls about 8 Tcf of Prudhoe Bay gas.
The new five-year oil and gas lease sale schedule announced last week
includes 16 areawide lease sales through 2005.
"After some juggling with the lease sale schedule over the past
couple of years due to uncertainties surrounding the BP-Arco merger, we
have settled down to a schedule that provides the predictability desired
by industry," Knowles said. "It also allows for public input
during the fall and winter months, when residents of these areas have more
time to focus on the issues."
The 16 sales include five in Cook Inlet, with one scheduled for each
May through 2005 and another five in the Beaufort Sea and five on the North
Slope, with one sale every October. A single in the North Slope Foothills
area will be scheduled this May. Under areawide leasing, which began in
1998, the state offers all available state land within a geographic region.
Since it began, the state has held six sales, leasing nearly 1.6 million
acres worth $68 million in bonus bids.
To learn more about the leasing schedule, visit the Division of Oil
and Gas website at www.dog.dnr.state.ak.us/oil.
Carolyn Davis, Houston