"Genuine Offer" Makes Gasline to Valdez Closer

"Genuine Offer" Makes Gasline to Valdez Closer

By Lee Revis
Editor, Valdez Star

CIVIC CENTER- The year 2011. "That's when gas is going to market," said Ryan Colgan of the Alaska Gasline Port Authority at the end of a press conference held in Fairbanks Monday afternoon. "That's our goal."

Colgan spoke the monumental words after Fairbanks North Star Borough Mayor Jim Whitaker announced that the AGPA had made a solid, bona fide offer to the state of Alaska and the three major oil producers on the North Slope to purchase one to two billion dollars worth of natural gas per year for thirty years. That translates to approximately four billion cubic feet per day of natural gas. "The market will determine the value," said Whitaker. "A fixed price is not part of the equation."

The monumental announcement is one giant step forward in the plan to export Alaska's natural gas reserves via a new natural gas pipeline from the North Slope to tidewater in Valdez. From there it will be shipped to west coast markets via specially built ships. "We think this is an historical event," said Whitaker.

The offer to buy the gas and bring it to market still has several obstacles to overcome before actual construction on a gasline can begin. Last week, the authority filed an application with the state under the Stranded Gas Act, which will need approval of the state legislature. "Every project has a number of hurdles it has to cross," Whitaker said.

However, the greatest hurdle may come from the leaseholders on the existing wells on the North Slope. Exxon, ConocoPhillips and BP, the big three producers, are sitting on an estimated 100 trillion cubic feet of natural gas, which is present in the crude oil wells on the North Slope. Currently, natural gas is re-injected into the wells of crude oil as it comes to the surface during crude oil extraction. The big three are currently focusing on bringing the gas to market via a pipeline through Canada to Chicago and the Midwest markets. "Its clear that the obligation to produce will be in effect," said Whitaker.

The project is estimated to be able to generate $370 million in revenues annually to the state. Under the AGPA plan, 60% of that figure will go to the state directly, 30% will go to incorporated municipalities all through Alaska and the remaining 10% will be distributed to non-pipeline communities to help offset the costs of energy in those communities.

The cost of the $16.1 billion project will be financed with the $18 billion in loan guarantees passed by Congress for the specific purpose of bringing Alaska natural gas to U.S. markets in the lower 48. Until a genuine offer to purchase gas was made, the federal guarantees where not available to any entity wishing to develop Alaskan reserves of natural gas, including a route to Chicago through Canada. With an offer to buy gas on the table, the AGPA is in a position to apply for the federal loan guarantees.

"We were hoping to release that (news of the offer) Saturday here," said Valdez Mayor Bert Cottle after the press conference. Unfortunately, the written offer was not ready for release as of Friday evening. Reportedly, the board of directors for the AGPA, their attorneys and representatives from Sempra Energy were working around the clock last week in Anchorage in order to finalize the details of the offer.

Representatives from the Sempra, the AGPA and their attorneys Rigdon Boykin and Bill Walker held a public presentation in Valdez last Saturday to update the citizenry on the current status of the project.