Did Sarah Palin get a gas pipeline for Alaska?

by Kay Cashman, Publisher, Petroleum News

Since Gov. Sarah Palin was selected as Sen. John McCain's running mate for the 2008 U.S. presidential election, she has taken some major media hits from critics who say she had not gotten a gas pipeline for Alaska.

I say she has come closer than any other governor to making a pipeline from Alaska's North Slope to market a reality. In her first two years in office two major North Slope oil producers, BP and ConocoPhillips, decided to build their own gas pipeline without any upfront guarantee of fiscal concessions from the State of Alaska. TransCanada, a major North American pipeline company, was right behind them with $500 million in state matching funds that would either result in a completed pipeline or a valuable certificate of convenience and necessity from the Federal Energy Regulatory Commission that would belong to the state if TransCanada pulled out.

In the summer of 2008, both potential pipeline owners started field work necessary for permitting and designing a line. Both the TransCanada Alaska project and the BP and ConocoPhillips' project (Denali—The Alaska Gas Pipeline) will soon have hundreds of millions of dollars into them, making cancellation less likely, and merging more likely.

During the 2007-08 winter exploration season Anadarko Petroleum and its partners put an estimated $75 million on the line to drill for natural gas in northern Alaska's Brooks Range Foothills (also referred to as the North Slope Foothills). It was the first time exploration in northern Alaska had targeted gas, not oil.

In this upcoming winter drilling season Anadarko plans to double, possibly triple, its exploration drilling for gas in northern Alaska.

Confidence in Gov. Palin getting a gas line built was probably not the only reason Anadarko and its partners started drilling for gas, but it was a major contributing factor because her Alaska Gasline Inducement Act, or AGIA, gave explorers such as Anadarko fair access to a gas pipeline; something explorers and the Palin administration did not think they would get with a producer-owned line. (Alaska's big three oil producers already have enough gas in their Prudhoe Bay oil field to fill a pipeline for a good 15 years.)

Ultimately, the economic feasibility of a natural gas pipeline from Alaska's North Slope will depend on natural gas prices. Because of the uncertainty of gas prices, North Slope producers will likely need fiscal incentives from the State of Alaska to be able to sell their top executives in Houston and London on participating in a gas line with TransCanada, or on building a line of their own. (The last time they built a big Alaska pipeline—the 800-mile trans-Alaska oil line from Prudhoe Bay to the Port of Valdez—the project was supposed to cost $900 million and ended up costing them closer to $8 billion.)

But based on Gov. Palin's performance to date, if the three big North Slope producers are involved in the ownership of a gas line those incentives will be acceptable to both industry and to the people of Alaska.

So has Gov. Palin gotten a gas pipeline for Alaska? The majority of Alaskans and the companies drilling for gas would say she has come closer than any other governor. And unless the market for natural gas in the Lower 48 states disappears, odds are a natural gas pipeline from Alaska's North Slope will be built.

Comments

[Hascat]

If these companies need financial incentives beyond making profits, the pipeline is not a sound investment.

[rockdalian]

Hascat,

Man, you are funny.
How about the current bailouts to banks, savings and loans, insurance companies, investment companies and auto companies?
How about the states of New York and California, whose governors are asking for bailouts?

None of these are sound investments.

Prediction: Illinois will join the list, begging for a bailout.

Dude, wheres my bailout?

[Kay Cashman]

Hascat -- The editor-in-chief of Petroleum News, Kristen Nelson, and I wrote a book called "Sarah takes on Big Oil." In it we told both the Palin administration's side of the gas pipeline story and that of Alaska's big three oil and gas companies. Under the previous governor they had secured, but failed to get legislative approval for, a fiscal contract with the State of Alaska that would have given them between $10 billion and $60 billion in incentives to build and operate the gas pipeline, so Gov. Palin's contract with pipeline company TransCanada is not to their liking. Still, BP, ConocoPhillips and ExxonMobil make a pretty strong case for at least some incentives. If you get a chance to read the book, let us know what you think about what they say. --Kay Cashman

[Stu Gustafson]

Kay Cashman & Kristen Nelson- Thanks for this great book- Anyone that takes the time to read with a business mind will see that Gov. "Sarah" put free enterprise back into the ALASKA energy program and snuffed the Good Oil Boys Game!!

Stu

[MarkG]

I doubt that Sarah Palin got a natural gas pipeline for Alaska. They have been saying that they were going to build one since 1974. I think that the oil and gas companies should give Alaska an incentive to tap the gas and oil since they make a profit on it. Why should they have some kind of a socialist kickback just to do what they are supposed to be doing? They are in business and they are the first proclaimers about free enterprise and their anti-welfare stance. Why do they ask for handouts so that they can make money. If they do get a handout they ought to sit every citizen of Alaska on the board of these so called private companies so they can get some of these large salaries. Otherwise maybe they should go back to Texas and uncap some of their wells and get the 'hard' money, not the easy money that Alaska has to offer. After all, what did oil companies ever give to anybody?

[Kay Cashman]

My name is Kay Cashman. I am from Anchorage, Alaska, and the executive editor/publisher of the weekly newspaper Petroleum News (www.petroleumnews.com). I am also co-author of ‘Sarah takes on Big Oil,’ a book about Gov. Sarah Palin’s stormy relationship with Alaska’s big three oil producers.

The book, like our newspaper, is factual and does not take sides, although I did go to bat for Gov. Palin (see editorial posted on this site) when the general press misreported her work on a gas pipeline from Alaska.

Americans had nine weeks to get to know Sarah Palin in the 2008 election. In her next two years in office, she will play a pivotal role in getting a gas pipeline built from the North Slope to Lower 48 markets. She will also play a major role in encouraging more oil and gas production from federal and state leases onshore and offshore Alaska.

By the end of 2010 Americans will know what Sarah Palin can accomplish as the chief executive of one of the largest oil-producing states in the union.

I am not saying Palin can make progress on either the gas line or pumping up Alaska's petroleum production because weakening oil and natural gas prices will play a part. Plus, the production tax hike pushed through by the Palin administration in 2007 is viewed by many of the oil companies doing business in Alaska as a deterrent to investment.

BUT Palin seems to understand the energy industry and has some industry savvy people working for her, so I will not be surprised if she is able to advance the gas line project, BUT I will be astonished if she can get the oil companies in Alaska to 'drill baby, drill.' Only time will tell.

I am trying to reach people who purchased 'Sarah takes on Big Oil’ because the company I work for is offering purchasers a free, two-year, online subscription to Petroleum News. This will give them a chance to keep on top of Gov. Sarah Palin’s performance on critical energy issues, so that in the next national election more Americans will have the facts to assess her competency for office.

Please send your receipt to hyates@petroleumnews.com to claim your two-year subscription.

[Linda]

Re: Sarah takes on Big Oil: great book written by the people who know and keep track of all things energy related in Alaska. I can hardly wait to see what Ms Palin will be accomplishing in the future: eu tu sarah! She has certainly broken the mold not only in Alaska politics, but nationally as well. With the continuing scrutiny of her it just proves that she IS to be taken seriously and is truly a factor to be dealt with by her opponents.