At Platts Energy Podium, Federal Coordinator Pearce Says Escalating Price Tag is Biggest Hurdle to Alaska Natural Gas Pipeline



    WASHINGTON, July 14 /CNW/ -- The escalating price tag for the proposed
Alaska natural gas pipeline is the biggest obstacle facing the massive
project, the top US official coordinating permitting said here on Monday.
    Appearing at the latest Platts Energy Podium event in Washington, Federal
Coordinator of the Alaska Natural Gas Transportation Projects Drue Pearce said
competing project proposals to ship gas from Alaska's North Slope to major US
markets are navigating treacherous political, financial and logistical
terrain, but progress has been made on all fronts. The best-case scenario for
completion of a project is around 2018, Pearce said, adding that "a more
realistic first-gas date, but still optimistic, is probably 2019."
    But as steel prices continue rising, permitting and construction delays
will increase the price tag for one of the largest energy infrastructure
projects in US history. The greatest risks are cost overruns and how that
might impact the cost of shipping about 4 billion cubic feet per day (Bcf/day)
of gas from Alaska to Chicago.
    "Those delays will be very, very costly if they happen," said Pearce, who
has been federal coordinator since late 2006. Once a project is permitted by
state and federal agencies, a single-season construction delay could add
"hundreds of millions, if not billions of dollars," she warned, adding that
"once we get through licensing, then the financial markets will have to make
the decision" on whether to go ahead with the project.
    Asked to describe her level of certainty that the long-delayed project
will be built within the next 10 to 15 years, Pearce said she was "very
optimistic" it will happen. "I see full glasses, not empty glasses. I do
believe we're closer than we've been in 30 years, and I believe it's time for
the gas to come to market. The Lower-48 states are going to need the gas
delivered in a pipeline at a stable price, a stable delivery, so I'm very
optimistic that now is the time to get it built."
    The project is moving along on two tracks. North Slope oil and gas
producers BP and ConocoPhillips have jumped ahead of TransCanada in the effort
to secure a permit from the US Federal Energy Regulatory Commission. FERC has
agreed to begin the "pre-filing process" for the producers' proposed Denali
Pipeline, which means the producers can begin some field work this summer. BP
and ConocoPhillips bypassed a formal process for getting a state endorsement
from Alaska, saying the conditions were too prescriptive and did not address
outstanding tax issues.
    Denali would be sited along the Alaska Highway. Canadian affiliates would
then transport the gas from the Alaska border into Alberta. BP and
ConocoPhillips told FERC the pipeline would connect either to existing
Canada-to-US pipelines, or the sponsors would build a pipeline southeast from
Alberta to the US border and, perhaps, across parts of North Dakota,
Minnesota, Iowa and Illinois to the Chicago area.
    Denali is the producers' alternative to a proposal by TransCanada that
awaits approval from the Alaska Legislature. Alaska Governor Sarah Palin's
administration has supported the TransCanada project because it met most of
the requirements of the Alaska Gasline Inducement Act, which establishes the
conditions for developers to obtain a state endorsement and a $500 million
financial incentive.
    State officials have encouraged the companies to merge the two projects
into one, both to gain momentum as a single initiative and because projected
gas production would not fill two pipelines, Pearce said. However, she said,
the companies do not appear to be heeding this advice.
    Sponsored by Platts, a division of The McGraw-Hill Companies, Platts
Energy Podium provides an ongoing forum for prominent newsmakers and the press
to address important energy and environmental issues. Members of the media may
receive complementary registration for Energy Podium events by contacting
Nancy Covey at 202-942-8719, Nancy_Covey@platts.com. A recording of the Drue
Pearce session is available via podcast at
http://platts.com/energypodium/index.xml/.
    
    About Platts:
    
    Platts, a division of The McGraw-Hill Companies (NYSE:   MHP), is a leading
global provider of energy and commodities information. With nearly a century
of business experience, Platts serves customers across more than 150
countries. From 17 offices worldwide, Platts serves the oil, natural gas,
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Platts' real time news, pricing, analytical services, and conferences help
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