Alaska Federal Pipeline Coordinator's Budget Slashed

January 02, 2012|by Rhonda McBride | Channel 2 News

ANCHORAGE, Alaska — One federal program comes into the New Year very much scaled down. The budget for the Alaska natural gas pipeline coordinator’s office was slashed by $3 million.

In the appropriations bill that President Obama signed last month, the office received only a million dollars for the 2012 fiscal year – about a 75 percent cut in funding.

In the last two budget cycles, the office received $4 million each year.

This follows Governor Sean Parnell’s announcement in October, that he’s shifting his administration’s emphasis from a pipeline to the Lower 48 – to a line that would move liquefied natural gas from the North Slope to a port in Alaska for export to Asia.

Larry Persily, the federal coordinator, cautions against reading too much into the federal budget cut.

“Whether the federal coordinator’s office has a million, two million, or three million; whether we have eight or nine or ten employees, it isn’t going to matter,” said Persily. “It is the fiscal structure and the market that will determine whether this project will still get built.”

Although an abundance of cheap shale gas in the Lower 48 has raised questions about the need for a pipeline from the North Slope to the Lower 48, Persily says the project continues to move forward.

Under the Alaska Gasline Inducement Act, or AGIA, TransCanada and its partner, Exxon, are still required to apply for a certificate to build and operate a pipeline by this October.

The two companies recently asked for a delay in submitting environmental paperwork, so they could consider the Governor’s decision to focus on LNG.

“If the companies were to come out next month and say, ‘Hey, we’ve decided we’re not going to build a line to the Lower 48. We’re going to try to build an LNG project to tidewater in Alaska,’ then you’re right,” says Persily. “We have no job. When your job disappears, the office should disappear. At the moment, we’re not at that point.”

For the time being, Persily isn’t planning on cutting back on staff. He says the pipeline coordinator’s office has a budget surplus of more than $2 million to carry it through this fiscal year.

Sen. Bill Wielechowski, D-Anchorage, says the federal cut to the coordinator’s office does send a message.

“I think it’s fair to say that they’re cutting money means that we’re probably not going to have a pipeline in the near future,” said Wielechowski. “I think that’s supported by the fact that TransCanada and Exxon are holding off on the resource report filing with the Federal Energy Regulatory Commission.”

Wielechowski, who serves as vice-chair of the Senate Natural Resources Committee, says it’s a good thing that the office is still being funded.

He says, with so many unknowns about the future of the natural gas market, it’s an important insurance policy for Alaska to keep this option alive.

“We have no idea where the price of gas is going to be in ten years, twenty years. This is a project that will produce gas for 30 years,” said Wielechowsi, who believes that sustained high natural gas prices could make a pipeline to the Lower 48 competitive and very attractive, if environmental worries over developing shale gas continue to grow.

But for the time being, one thing hasn’t changed. Alaska’s gas remains stranded with no consensus about how best to bring it to market.

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