Until now, Governor Parnell has backed the Canadian route. But this week, he told oil and gas industry leaders it’s time to consider a large diameter in-state line, which he believes can be pursued under AGIA, which also has an option for an in-state line to Valdez.
“TransCanada’s commercial negotiations with shippers don’t appear to be moving forward at this point,” Parnell told AOGA members.
The Governor also said he’s been in communication with TransCanada, Exxon, BP and ConocoPhillips about the need to work together on an in-state line.
“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,” said Parnell. “If the market demand for gas has truly shifted away from the Lower 48 to Pacific Rim markets, then the State of Alaska must also be willing to move with that.”
Many thought Parnell was referring to the All-Alaska project, which would take gas from the North Slope and follow the Trans Alaska Pipeline to Valdez. But lawmakers like Rep. Mike Hawker, R-Anchorage, noted that Parnell used the word “tidewater,” not Valdez.
“Tidewater means a place where the ocean touches the state of Alaska,” said Hawker. “What I heard the governor doing was keeping all options open, as well he should.”
Hawker says it makes more economic sense to bring the gas to South Central Alaska for export. Although AGIA specifies Valdez, Hawker says another route can be chosen, if all parties agree.
Hawker had praise for Parnell.
“I find it a very exciting announcement, because it was a clear acknowledgement from the state, to consider how the markets in the world have evolved over the past several years,” says Hawker. “What I hear the governor talking about is the need to eliminate these competing objectives and converging alignment behind a single concept.”
Parnell had been focused on a small-capacity gas line from the North Slope, to help ease gas shortages in South Central. But opponents of the project questioned whether it was economical.
Sen. Bill Wielechowski, D-Anchorage, also supports the governor’s plan and says his leadership is needed to bring the producers, TransCanada and the state into alignment.
“The people in Valdez are absolutely gonna want the Valdez line,” said Wielechowski. “A lot of people in South Central want the Nikiski line. We need to do what’s best for the state.”
And what’s best for the state, Hawker believes, is to let the market determine the route.
“The lesson from AGIA, that we as legislators should have learned, is that we cannot successfully dictate terms of a mega-construction project. We have to empower the industry to accomplish what we want done and stand back and let market forces work,” said Hawker.
Bill Walker, who campaigned in last year’s Republican race for governor, says he’s glad Parnell is finally acknowledging that a gas line to the Lower 48 is no longer viable. He says that was apparent four years ago.
But Walker, who is also general counsel for the Alaska Gasline Port Authority, says the state should just build the line itself. Walker says the state has spent too long waiting on producers to develop North Slope gas.
“More of the same of what has not worked for the past 30 years is not the answer for the future,” said Walker.
Walker also says he’s skeptical about a route to Nikiski, which South Central lawmakers say would provide more suitable land and opportunity for industry to develop around a gas line.
Walker says there’s been a $100 million dollars of work invested in the Valdez route, which was championed by two former governors – Bill Egan and Walter Hickel. Walker also says an LNG line will require a deep port like Valdez, to support the super tankers that will carry the gas to market.
“I’m looking for a finished project,” said Walker.
The governor has not said which port he prefers, only that he plans on getting the legislature to approve a project and a new tax structure in the upcoming session.
He told AOGA members Thursday, “We will not wait another legislative session for progress.”
“If TransCanada, Exxon Mobil, and other potential major shippers get better alignment on AGIA over an LNG line to tidewater in Alaska, the state can be flexible,” said Parnell.