The energy status quo in Alaska “isn’t good enough,” and the industry, regulators, lawmakers and consumers all need to reconsider how the state handles oil and gas, according to Gov. Sean Parnell. And targeting natural gas markets in Asia, rather than the Lower 48, should be one of the things considered, he said.

“If market demand for gas has truly shifted away from the Lower 48 to the Pacific Rim market, then Alaska must also be willing to move with that — and we are,” Parnell said at the Alaska Oil and Gas Association’s annual luncheon in Juneau Thursday.

Alaskans are frustrated by regulatory and legal obstacles that continue to hold up plans for a gasline, Parnell said.

Through the framework of the Alaska Gasline Inducement Act (AGIA), Alaska has resolved litigation of the Point Thomson gas fields with ExxonMobil Corp. (see Daily GPI, Aug. 17), but “there’s still no public word from the other working interest owners about whether they’re going to join us in a settlement,” Parnell said.

Before Alaska can get a gasline, another issue needs to be overcome, Parnell said. “We need realignment among shippers of gas around the project. TransCanada’s commercial negotiations with shippers do not appear to be moving forward at this point…the market demand for Alaska gas may have shifted since AGIA was passed.” At that time, gasline companies were seeking Lower 48 gas. “Today, however, the glut of shale gas discoveries in the Lower 48, combined with the devastating tsunami in Japan and that nation’s subsequent shift away from nuclear power, and other market forces in the Pacific Rim, all mean that a better market for Alaska gas could very well be in Pacific Rim countries.”

Parnell said he has told companies entangled in the gasline saga — TransCanada Corp., ExxonMobil, BP plc, ConocoPhillips and the Alaska Gasline Development Corp. (AGDC) — “how frustrated Alaskans are at the lack of progress on a gasline. I also let them know that on the AGIA side of the equation, where they appear to be at an impasse on commercial terms over a line to the Lower 48, that I want them to move forward on a large-diameter LNG [liquefied natural gas] pipeline to tidewater in Alaska.

“All of these parties can keep the Lower 48 option alive, but I want to see if they can get commercial alignment on pursuing a large-diameter LNG pipeline to tidewater,” Parnell said. In an effort to get past the status quo, tax and royalty terms could be discussed, he said.

In Washington, DC, on Friday Sen. Lisa Murkowski (R-AK) said she welcomed Parnell’s LNG export proposal. Commercializing the state’s natural gas will be a central part of the discussion at a hearing of the Senate Energy and Natural Resources Committee Nov. 8, she said.

“In the meantime, I think it’s worthwhile for the state to consider the benefits of providing a level of support for accelerating construction of a large-diameter line as far as Fairbanks — which will be necessary no matter where the bulk of the gas ultimately is monetized,” Murkowski said.

In February, Murkowski and Sen. Mark Begich (D-AK) reintroduced legislation designed to streamline development of an in-state natural gas pipeline in Alaska by allowing its passage through a national park (see Daily GPI, Feb. 14). That move coincided with the introduction of a bill by Republican lawmakers in Alaska intended to light a fire under efforts by TransCanada to construct a natural gas pipeline from the North Slope to serve Lower 48 markets (see Daily GPI, Feb. 10).

The Alaska Department of Natural Resources in August agreed on a right-of-way for a proposed pipeline to carry natural gas from the North Slope to the state’s Cook Inlet region (see Daily GPI, Aug. 2). AGDC, a subsidiary of Alaska Housing Finance Corp., is promoting its plan for the 737-mile pipeline to supply the state’s Southcentral region, which many believe will run short of gas supply in a year or two (see Daily GPI, July 7).

The federal coordinator for the Alaska transportation project has said Alaskans would benefit most from a joint project to build the planned 4.5 Bcf/d pipeline from the North Slope to ship natural gas south to Canada and the Lower 48 states along with a spur distribution line to serve southern Alaska, but the state is going to have to chip in with considerable financial support (see Daily GPI, Aug. 18). A number of pitfalls also were cited for plans to build an LNG terminal to export Alaskan gas, including the fact that the LNG export market is much smaller than the North American overland market.

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