Alaska Gov. Tony Knowles’ State of the State address this weekcentered on what could become the legacy of his administration: an1,800-mile natural gas pipeline to transport the state’s 36 Tcf tothe marketplace. With energy prices and energy consumption burstingat the seams, Knowles is dedicating the remainder of his term,which expires in 2003, to the gas project.

“This year there’s probably more optimism about the financialfuture of the state in terms of the economy and jobs than thereevery has been before,” Knowles said. “Alaska finds itself wellpositioned to meet America’s growing thirst for energy. Ourchallenge is to advance the interests of Alaskans as we work withindustry and the marketplace.”

To “jump start” the permitting process, Knowles is requesting $4million from Alaska’s 22nd Legislature to fund a comprehensivepipeline coordinator’s office that would streamline the work.Another part of his pipeline package calls for legislators toestablish an Alaskan Highway route for the pipeline. He also wantsthe state’s laws changed to allow a special tax structure thatwould make the project more attractive to developers.

“My way IS the highway,” Knowles said. “Alaska’s natural gas canbe the foundation of a 21st century economy of high tech resourcedevelopment, high tech manufacturing and new business growth andquality of life based on affordable clean energy. With known andproven reserves of up to 100 Tcf, natural gas can fuel our economyfor the next 50 to 70 years, but to start this mammoth undertaking,we need a single point of contact.”

On Monday, he signed an administrative order creating hisnatural gas “policy cabinet” with a State Pipeline Coordinator atthe helm who would not only coordinate the permit process, but alsooversee construction of the pipeline, which would transport gasfrom the North Slope to the marketplace. “Our objective is toimplement the ‘one-stop shopping’ approach to maximize efficiencyin processing required approvals and permits and optimize statepipeline expertise and performance.”

Commissioners from each state agency would be represented in thepolicy cabinet, and each agency involved in pipeline permitting andauthorization would have a liaison officer to represent it duringthe coordination process. The state’s Departments of NaturalResources, Environmental Conservation, Fish and Game, Revenue,Transportation and Public Facilities, Labor and WorkforceDevelopment and Community and Economic Development all would berepresented.

To complement the plan, Knowles has introduced legislation toamend the state’s stranded gas rules passed in 1998. The rulesfacilitate natural gas commercialization to include an AlaskaHighway natural gas pipeline or a gas-to-liquids (GTL) project. The1998 bill allowed the state to negotiate the fiscal terms of a gasline, including a contract for payments instead of taxes, butspecifically applied to a liquefied natural gas project.

Knowles’ revised legislation would expand the provisions in thestranded gas bill to any viable project because, he said, the mostpromising market for Alaska today is through a pipeline to theMidwest. And other companies are exploring new GTL technology.

Although the Alaskan governor, who first took office in 1994, ismaking the gas line the centerpiece of this year’s agenda, he haslong been a pipeline advocate. In November, he said he wanted apipeline built to follow the Alaska Highway, saying use of theestablished transportation corridor would be the easiest and leastexpensive way to bring gas to market. Another plan, which Knowlesthinks has too many problems, would carry gas from Prudhoe Bayacross the Beaufort Sea, through the Mackenzie River Delta toAlberta.

In any case, an Alaskan pipeline has industry support. Major Alaskaproducers BP Amoco, Phillips Petroleum and Exxon Mobil told a Senatecommittee last September that they collectively are pursuing plans tobuild a pipeline to deliver North Slope natural gas to the Lower 48states, and hope to file an application with the Federal EnergyRegulatory Commission this year (see Daily GPI, Sept. 15, 2000).

The three own most of the reserves in the North Slope andPrudhoe Bay regions. Exxon Mobil has a 40% stake; BP Amoco controls30% of the gas; and Phillips Alaska estimates it controls about 8Tcf of Prudhoe Bay gas.

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