CEO: Lack of funds knocks gas line off-track

Alaska’s plan to build a 24-inch, in-state gas pipeline from the North Slope to Southcentral Alaska has been set back by delays in funding by the Legislature, according to the CEO of the state-owned Alaska Gasline Development Corp.

The project will not achieve its objective of holding an open season in late 2013, said Dan Fauske, president of ADGC. Fauske spoke in a briefing to the Legislature’s in-state gas caucus. There is no new target date for the open season.

ADGC is more on schedule in securing its major permits, however. A federal environmental impact statement is expected to be finalized in September, Fauske said.

Also, discussions are on track with TransCanada Corp. and major North Slope gas producers on ways of merging the state’s project with a proposed large-diameter gas pipeline built from the North Slope to a natural gas liquefaction plant in Southcentral Alaska, Fauske said.

Gov. Sean Parnell had asked TransCanada and the producers for a report on their assessment of a pipeline and LNG project by Sept. 30, and for a plan to merge the state’s effort for its in-state pipeline with the industry’s larger project.

“Having the EIS complete is worth a lot in merging our efforts with those of TransCanada and the producers because the work we have done will save them a lot of money,” Fauske said.

Planning for the AGDC 24-inch pipeline project was launched two years ago as a contingency to deliver North Slope gas to Alaska communities in Interior and southern Alaska in case the larger industry-led pipeline effort does not move forward.

Fauske said that if the TransCanada project does move forward, ADGC would refocus its project to become a spur line to Southcentral Alaska from the larger pipeline.

Meanwhile, engineering and permitting work continues on the 24-inch pipeline, which is being designed to deliver 500 million cubic feet of gas daily to Interior and southern Alaska. About 260 million cubic feet per day would be sufficient to supply in-state needs for power generation and space heating in Alaska’s Interior and Southcentral communities, mainly the cities of Fairbanks and Anchorage, Fauske said.

The remaining 240 million cubic feet per day of capacity would be available for industrial use in the state, he said.

The state has appropriated $54.4 million for the project through the current state fiscal year 2013. The Legislature has also placed an additional $200 million in a special fund to pay for the work needed to get the project through an open season.

However, in the 2012 legislative session lawmakers did not pass a bill that would have allowed ADGC to access the $200 million, Fauske said. Discussions between the state corporation and TransCanada and the producers have also been hampered over restrictions on the state corporation’s ability to keep certain data confidential, he said.

The bill legislators failed to pass would have given AGDC authority to retain confidentiality on information obtained from the TransCanada group.

ADGC spokeswoman Leslye Langla said the work under way this year includes geotechnical work related to compliance with U.S. Department of Transportation pipeline regulations and in procurement of engineering services for a gas conditioning plant at Prudhoe Bay.

A request for proposals is now being prepared by ADGC for a contract on engineering services for the conditioning plant, Langla said.

Costs to build the project have been estimated at $7.52 billion in 2011 dollars. Based on those estimates, and assuming that 70 percent of the project is financed by debt and 30 percent by an equity investment, the “all-in” cost to consumers for North Slope gas delivered to Southcentral Alaska has been estimated at $9.63 per million British thermal units, or Btus.

This is close to the current all-in cost of about $8.70 per million Btus, Fauske told the legislators.

The all-in cost of gas delivered to Fairbanks is higher, at $10.45 per million Btus, he said. This is because of the added cost of building a 35-mile, 12-inch connecting pipeline to the main 24-inch line, as well as a $250 million “staddle” plant needed to separate natural gas liquids from the gas going to Fairbanks, Fauske said.


Tim Bradner can be reached at [email protected].

08/09/2012 - 4:33pm