Alaska Gov. Sean Parnell has never been known as a grand visionary -- rather, a quiet governor. But on Thursday, with the announcement that he now favors a natural gas line that would send Alaska's Arctic natural gas to tidewater to be liquefied before being shipped to market in tankers, he went all Wally Hickel on Alaskans in his own quiet way.
At the Alaska Oil and Gas Association annual luncheon in Anchorage, Parnell said he wants the companies charged with building the line to "reconsider" their current tactic and go with an "LNG pipe from the North Slope to tidewater."
Parnell didn't specify what tidewater. In a later email, his spokeswoman, Sharon Leighow, clarified it could be tidewater in Valdez, the Matanuska-Susitna Valley, or even Nikiski on the Kenai Peninsula.
"Economics will dictate which location is feasible," she wrote. In any case, Parnell is calling for the fabled all-Alaska gasline.
An old pipe dream
Parnell noted the Lower 48 shale gas boom has made markets there unfavorable for Alaska's natural gas. Today's big market is Pacific Rim countries, he said, partly because the earthquake and tsunami that struck Japan earlier this year cut the availability of nuclear power.
Talk of an Alaska gas pipeline has been going on since workers struck Prudhoe Bay oil in 1968 and has been one of Alaska's most wrought, highly charged political issues. Over the years, various routes and plans have been put forth.
In 1977, President Jimmy Carter signed legislation designating the Alaska Highway as the route, paralleling the existing highway and then veering off into Canada.
Wally Hickel, governor in 1968 before heading to the Interior Department, had another idea. When he came back to Alaska in the early 1970s, until the day he died in 2010, Hickel fiercely advocated for an all-Alaska gasline from the North Slope to Valdez.
Sending Alaska gas to Canada would be selling out, he thought. He wanted the pipeline to parallel the existing Trans-Alaska Pipeline to Valdez, where it would then be liquefied and sent out in tankers.
Mostly, Hickel wanted Alaska to own the line as well as the gas. Ownership would allow the state to benefit from a profitable petro-chemical industry. Mant residents in Alaska thought that idea was, well, a little out there.
Bill Walker, who unsuccessfully ran against Parnell in the 2010 GOP gubernatorial primary, has since taken up the all-Alaska mantle. But Hickel, who died in May 2010, was the only governor to advocate for such a route.
Palin administration preserved LNG option
Former Gov. Sarah Palin seemed to support Hickel's ideas when campaigning, but once elected she opted to contract the project out and leave it up to the market to decide.
In 2007, the Alaska Legislature passed the Alaska Gasline Inducement Act (AGIA), which set up a framework to move along a project. Part of that process involved awarding a license to TransCanada, a Calgary-based pipeline builder, along with up to $500 million in subsidies. TransCanada eventually teamed with ExxonMobil.
Although Palin, as governor, supported a pipeline from Alaska to Canada, she did leave in the AGIA framework an option for an in-state pipeline from the North Slope to Valdez, where the natural gas could be liquefied and shipped on tankers to overseas markets. At the time, this provision seemed a nod to her supporters who favored the old all-Alaska gasline idea, at least as far as the route to Valdez and the idea of LNG tankers.
For Parnell, the provision is now a reality. To be clear, he isn't advocating for the state to own the pipeline, as Hickel would have done. Neither was Parnell conceding anything in his announcement Thursday.
But the idea of an LNG line seems to be gaining traction, even within industry circles. Talk among insiders in the past month -- the same insiders, it should be noted, who had previously disparaged the idea -- has been that LNG may be the the only way to get Alaska's Arctic natural gas to market.
So far, TransCanada has failed to secure agreements with shippers. But the details of those agreements remain confidential, including who has committed gas to the line, bid on the gas and at what price, and for what proposed route.
In an interview Thursday, Pat Galvin, who was Palin's revenue commissioner and an architect of AGIA, said a benefit of the legislation was that it allowed for both the route to Canada and line to Valdez.
"We've always said that we wanted the project to test the market, (which) would result in the project that the market is ready for," he said.
Larry Persily, the federal natural gas pipeline coordinator, said on Thursday he would support any route that would spark result in Alaska pipeline project. However, he's worried that Parnell's switch signals Alaska might be chasing the "hot-market du jour," something of which Alaska has a history of doing.
Who needs a big pipeline?
And yet there's another idea that has been floating around Alaska's oil and gas patch. Is it really necessary to build a multi-billion dollar pipeline to get Alaska's gas to market?
The vast majority of the state's natural gas sits close to the Arctic Ocean. With the Arctic melting, why not turn that gas into LNG and ship it from an Arctic port?
Earlier this year, Korea Gas Corp. -- the world's largest importer of liquefied natural gas -- was showing interest in this very idea, only across the border, in Canada's Mackenzie Valley -- another big Arctic natural gas reserve. Korea Gas was eying the potential of shipping Mackenzie gas via LNG-icebreaking tankers through the Northwest Passage.
In August, Alaska Dispatch reported the Parnell administration didn't seem into the Arctic LNG idea -- perhaps because that would mean Alaskans wouldn't benefit from a big pipeline construction boom.
Here's an excerpt from the story, "Does anyone want Alaska's natural gas?":
...late last year, two Alaska resource proponents had a deal of sorts in the works with Kogas and arranged to visit Kogas officials in South Korea to talk about Alaska natural gas and a gas pipeline. Bill Noll, the former state commerce commissioner who died in June, and Harold Heinze, the chief executive officer of the Alaska Natural Gas Development Authority, had worked for months to set up a meeting and finally had it arranged for late January, according to documents obtained from ANGDA under a public records request.
But shortly before the trip, Parnell nixed it. A Jan. 28 letter from Noll to Kogas President K.S. Choo explains that the governor "wants to wait for further results from the two Open Seasons now being conducted by the major oil producers." Noll went on to say he was hoping to meet with Parnell in February and "I intend to emphasize the strong activity that your company has recently demonstrated through your investments in Canada and Australia."
Joe Balash, deputy DNR commissioner, said Kogas has not shown any interest in Alaska gas and that nothing more has been done to reach out to the company. He said a 2008 executive order signed by then-Gov. Sarah Palin that is still in effect makes it clear Alaska is interested in working with anyone who is interested in LNG. Companies know the executive order is in place "and we will work with them constructively," Balash said, adding that the state did meet with Mitsubishi on LNG but nothing came of it.
Still, he said "I would characterize our efforts on (LNG) as passive rather than active."
Contact Amanda Coyne at amanda(at)alaskadispatch.com.