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Oil companies predict trans-Alaska pipeline to run for decades

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Posted: Thursday, October 25, 2012 11:51 pm | Updated: 11:52 am, Mon Jan 21, 2013.

FAIRBANKS— The oil companies say we should not worry about the trans-Alaska oil pipeline shutting down anytime soon.

In a proposed settlement with the state about the “life of the line,” the companies say it will be economic to run the line until 2044.

Earlier this month, the companies and the state submitted the settlement agreement to the Federal Energy Regulatory Commission and the Regulatory Commission of Alaska.

The settlement includes a depreciation schedule starting in 2013 that puts the “remaining life” of the line at 32 years.

The settlement stipulates the depreciation factors to use in setting transportation rates.

This is the clearest sign so far of what the oil companies think about the future of the pipeline.

And it should end the discussion in Alaska that the pipeline may shut down in 10 or 20 years. The companies would demand a must faster depreciation schedule if they believed that were true.

The schedule does not include a fixed 30-year depreciation schedule, which is good for the state. The schedule says after five years it will be reopened and subject to renegotiation. The original trans-Alaska pipeline settlement agreed to by the state in 1985 locked the state into a long-term deal that cost the state billions of dollars.

The depreciation schedule shows how capital investments will be recovered in the long term.

The companies are allowed to recover those costs as part of the transportation cost of getting to Valdez.

The depreciation rate reaches zero when the pipeline’s economic life is over, which is 2044 according to this settlement.

The original pipeline settlement allowed the oil companies to get 90 percent of their investment back in the first 14 years or so of pipeline operations, an accelerated schedule that increased profits.

•••

HAPPY WITH HIPOW: The Monroe Foundation, which works year-round to support the Catholic Schools, has an annual target of $1.2 million.

It starts the year with the HIPOW weekend, the premier public event of this effort.

Nancy Hanson, the director of the Catholic Schools, says HIPOW brought in more than $650,000 this year, which is more than half of the goal.

“Coupled with the $75,000 raised in August and September to replace windows in Monroe, the fall months of 2012 have been remarkable,” she said.

•••

PIPELINE STATEMENT: The final Environmental Impact Statement for the proposed in-state gas pipeline is open for public comment starting Friday.

The 737-mile pipeline from the North Slope to Anchorage would include a 34-mile spur line from Dunbar to Fairbanks.

The main line would be 24 inches wide, while the spur line would be 12 inches.

The EIS says that a proposed large-scale pipeline form the North Slope to Southcentral is uncertain and therefore spur lines to provide gas to Anchorage and Fairbanks “would not be a reasonable alternative.”

The document proposes a new stand-alone suspension bridge over the Yukon River to carry the pipeline. 

The EIS said the state found that a Richardson Highway route would cost 10 percent more and it “would not in fact present environmental advantages over the project as proposed.”

One of the comments that has come up repeatedly in Fairbanks is why the cost of a spur line would be borne by Fairbanks residents only and why the state made assumptions in route selection that don’t hold down the cost to this area.

•••

GOOD CHOICES: The three people named so far to the borough municipal gas utility by City Mayor Jerry Cleworth and Assembly Presiding Officer Diane Hutchison represent the type of talent we need on that board.

Steve Haagenson is the former CEO of GVEA and the former state energy director.

The other two appointees, engineer Frank Abegg and Mike Meeks, longtime director of public works at Fort Wainwright, also have the depth of experience needed to take on this difficult task.

Four appointments remain to be made, three by Borough Mayor Luke Hopkins and one by North Pole Mayor Bryce Ward. The appointments should be made as soon as possible.

Dermot Cole can be reached at cole@newsminer.com or 459-7530.

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