Alaska needs a new approach to resource development, one that could ease the journey from project concept to construction and that also might help avoid plant closures like the one announced by Agrium U.S. Inc. for later this year, a former state senator said Jan. 4.
John Torgerson, currently special assistant to the commissioner of the state Department of Transportation and Public Facilities, spoke before a large Soldotna Chamber of Commerce audience gathered to hear Agrium officials discuss the imminent demise of the Nikiski fertilizer plant, now set for Nov. 1.
While his comments were linked to the Agrium situation, they went much further. Advising the crowd that his comments were strictly his own and not to be interpreted as a position of the state, he urged Agrium not to give up its efforts to find a new and dependable source of gas.
He then outlined three steps he said he believes the state should take to avoid future closures and facilitate energy production in Alaska. First, he said a ruling by the Regulatory Commission of Alaska establishing a gas pricing methodology based on a Lower 48 price structure should be challenged. Second, he said the Alaska Legislature should create a state court of appeals devoted entirely to natural resource issues. Finally, he said Alaska should take a fresh approach to construction of a gas pipeline from the North Slope.
As he put it, there should be "a gas line to Southcentral Alaska with a spur line to Chicago." That brought a round of applause from the audience.
The regulatory commission's ruling on price structure made a few years ago upset what had been a more or less stable system by setting the base price on an Outside gas trading regimen called the Henry Hub. Areas outside adjust gas prices from the Henry Hub depending on local market conditions.
It hasn't worked well for Cook Inlet gas, Torgerson argued, saying it had led to gas prices increasingly unaffordable for industry and general consumers.
"We almost all felt it immediately with the Enstar Natural Gas price increases that so far to date have been about 30 percent," he said.
The RCA decision was aimed at promoting exploratory gas drilling and production around Cook Inlet, and to some degree, Torgerson said, it has worked, because higher prices mitigated the financial risks. But it didn't take into consideration the impact on the economics of the inlet basin, he said.
Torgerson offered an example of the effect on prices. He said if a new gas supply was found beneath Agrium's Nikiski plant and could be developed and delivered without a pipeline, the price of that gas would still be linked to the Henry Hub. In his opinion, the ruling has served to hurt existing industry and could make it tough to attract new industry to the state, he said, adding the RCA is there to protect consumers from high prices, not engage in economic development.
Torgerson went on to say a natural resources court of appeals would be able to expedite legal issues that often delay projects. Many challenges come from the environmental community, he said.
Industry and the environmental community would stand to gain by a court system set up to focus on such issues and deliver decisions in a timely manner, he said.
Such expedited judicial- and committee-level reviews already have been granted to the major gas producers with regards to a future gas pipeline from the North Slope. Alaskans engaged in oil and gas, as well as other resource extraction projects, such as mining and timber, should be afforded the same opportunity, even if not of a "$20 billion nature," he said.
Torgerson said critical to any discussions about a pipeline is delivery of gas to Southcentral Alaska, Fairbanks and other areas where it is needed. If the timeline is right and major producers can build a pipeline that can be tapped by a spur, then the Legislature and the administration should pursue that path.
"But if it doesn't, then I look for our legislators to initiate a line from Prudhoe Bay down to Southcentral and bring gas to Southcentral Alaska so we don't have this problem," he said.
Such a project would require a public vote, bond issues and more, but it would be possible.
"It can be done, and it should be done so that we can at least count on our future," he said.
