The Alaska Contractor - Summer 2008

Alaska must see gas line
built for good of state, and soon
Nearly 50 percent of Alaskans were not in the state
when construction began on the trans-Alaska oil
pipeline in 1974. The tremendous economic boost
the construction of such a major energy project gave the
state, and the way it transformed our infrastructure and way
of life, is not always recalled or given credit.
Yet today, we have another tremendous opportunity
for an economic shot in the arm with the construction of a
natural gas pipeline. We should all remember, however, the
reasons behind the bumper stickers on Railbelt trucks that
say things like, “Please Lord, give us one more boom. This
time we promise not to throw it away.”
It is expected that whichever project moves forward,
whether it is TransCanada’s bid under the AGIA process, or
the Denali Project submitted by Conoco-Phillips and BP, or
another proposal not yet considered, there will be hundreds
of jobs created during the environmental planning, design
and engineering phases – possibly as soon as this summer.
It is likely the project will produce somewhere between
9,300 and 18,000 direct jobs in state over the three years of
Alaska construction. The direct payroll should generate another
23,400 indirect jobs, pumping $5 billion into the state’s
economy. Once the pipeline is in operation, there are likely
to be another 500 permanent jobs.
Beyond the creation of jobs, the state of Alaska estimates
that the gas pipeline project should generate $2 billion in
new state taxes annually, once a tax structure for the gas has
been decided, and provide another $50 billion to $100 billion
to the treasury with the sale of the state’s royalty gas. That
means another $25 billion could be placed into the Alaska
Permanent Fund, with the dividends putting an additional
$500 million annually into the state’s economy.
But for all of these rosy economic numbers to become
reality, the state must get Alaska’s gas into the American
market quickly. We should not be lulled into thinking Alaska
is the only source of natural gas for the market to turn to.
Beyond imports of LNG, today’s record high prices are driving
a rush of new exploration domestically and increasing
pressure to open additional areas in our Outer Continental
Shelf (OCS) to development. From the Gulf of Mexico to the
Marcellus Shale field in the Appalachians, from the Barnett
field in Texas to the shale deposits in the Rocky Mountains,
there are some 800 drill rigs at work today looking for gas
– nearly three times the number of rigs looking for oil.
BY U.S. SEN.
LISA MURKOWSKI
In addition to the increasing competition, the cost of
building a pipeline is skyrocketing. This year alone, steel
prices have almost doubled and material prices for everything
from heavy machinery to compressors have sharply
escalated. Couple that with an increased shortage of skilled
workers and it is clear that any delay threatens a pipeline’s
financial viability.
A loss or even a delay in our ability to move Alaska’s
gas to market has even more serious, far-reaching repercussions
for our state than just the loss of potential revenue
and jobs. It is easy to have a false sense of security
when record oil prices are providing for large state budget
surpluses. But those prices paper over a real threat to
Alaska’s future – our rapidly declining oil production from
our northern fields.
In 2008, Alaska is likely to produce a little more than
700,000 barrels of oil per day from the North Slope, far from
the high of 2 million barrels in 1991. While at today’s prices,
smaller, more marginal wells are coming online and helping
to fill the Trans Alaska Pipeline System (TAPS), any future
drop in oil prices will speed the downturn in Alaska’s production.
The Energy Information Administration forecasts
that Alaska will produce less than 500,000 barrels of oil
per day next decade, with oil flows potentially falling low
enough by 2030 to force the closure of TAPS, shutting in the
remaining oil on the North Slope.
A gas line, however, will not only produce another revenue
stream for Alaska, but also spur new oil exploration.
Since oil is usually found during the search for natural gas,
it is estimated that getting our gas to market will trigger the
discovery of another 2 billion barrels of Alaska oil. It is entirely
reasonable to argue that getting our gas to market is
needed to keep our oil flowing.
Adding together the uncertainties surrounding climate
change legislation and the potential impact of endangered
species listings on future permitting, there is no question
that Alaska cannot risk a delay in building a natural
gas pipeline by prompting regulatory or court fights, or by
complicating the financial arrangements of an agreement.
Getting Alaska’s gas to market is vital for the future of our
state, for our children and our grandchildren. There is no
time to waste.
U.S. Sen. Lisa Murkowski represents Alaska in the U.S. Senate.