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Alaska Gasline Development Corp. unveils reworked pipeline proposal

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Posted: Friday, December 21, 2012 12:20 am

FAIRBANKS — The Alaska Gasline Development Corp. on Thursday unveiled a reworked version of its in-state natural gas pipeline that provides lower prices for Fairbanks and communities along the proposed route from Prudhoe Bay to Southcentral.

An earlier version of the project faltered during the 2012 legislative session. The revised proposal drops costly processing facilities for natural gas liquids. The liquids are no longer as profitable because the market is awash, thanks to the Lower 48 oil boom.

That change means the entire 737-mile pipeline and its 35-mile lateral line to Fairbanks can be constructed with more affordable, standard technologies, AGDC Pipeline Engineering Manager Frank Richards explained to the Legislature’s In-State Gas Caucus on Thursday in Anchorage.

“Those are expensive facilities to have in that design, and it was based on, at the time, a market where natural gas liquids were at a premium,” he said. “However, the world has changed in the last couple years.”

Without the need to handle the expensive “wet gas,” the plan can be shifted to a larger 36-inch pipeline that operates under lower pressures than needed before. That would allow a great reduction in the number of processing facilities and allow the use of widely available piping and valves.

“We’ve reduced an enormous amount of facilities,” Richards said. “What that means is we’ll be able to provide it to Fairbanks and other communities at a significantly lower cost because we won’t have those facilities attached to an enriched gas stream.”

Without those extra facilities, the price of delivered gas to Fairbanks goes down to about $8.25 to $10 per thousand cubic feet, about a third of what it costs to heat with oil.

The previous plan had run up against opposition for its high cost and the fact that it delivered gas to Fairbanks at a rate higher than Anchorage. The previous plan had estimated a rate of about a dollar or two more per million cubic feet of natural gas. It required Fairbanks ratepayers to shoulder much of the price of a costly plant needed process the “wet gas” into a form usable in Fairbanks.

A proposed natural gas trucking program, for which Gov. Sean Parnell has put forward a $355 million financial package, is aimed at delivering gas at about $15 per thousand cubic feet to residents and businesses. The trucking plan is scheduled to have gas delivered sometime in late 2014.

AGDC’s pipeline would have gas flowing around late 2019 and the complete project is estimated to cost about $7.7 billion.

To keep AGDC’s pipeline on schedule, Richards said, it would require an additional $400 million in state funding and increased authority granted by the Legislature, and he urged members of the caucus to support new legislation proposed by Reps. Mike Hawker, R-Anchorage, and Mike Chenault, R-Nikiski.

“It’s really contingent on funding,” he said. “With (existing funding), we’ve been able to continue that pipeline work and some of the facilities engineering work. But we have a tremendous amount of work to do over the next year and a half. It really depends on our funding. If we’re fully funded, then we’ll advance.”

Chenault and Hawker proposed legislation during the previous session, but it faltered in the Senate when it ran up against concerns that it granted AGDC too much power without proper legislative oversight.

Hawker said the new legislation, which still is in the works but will be ready for the start of the session, would grant much of the authority that the previous bill had offered but will propose to set up AGDC as its own independent agency, no longer under the purview of the Alaska Housing Finance Corp.

The pipeline project is being developed at the same time as a large-diameter pipeline to tidewater for export. Legislators said they were pleased to see work continuing on both but said they were hesitant about fully funding two efforts when they could be duplicating work that could be combined eventually.

Contact staff writer Matt Buxton at 459-7544 or follow him on Twitter: @FDNMpolitics.

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