Alaska Voters Hold the Key to the North Slope

As political shenanigans continue to delay approval of the Keystone XL pipeline, Alaskan voters hold the key to avoiding a similar fate for what could be North America’s largest pipeline project.

At an estimated cost of at least $45 billion, the Alaskan LNG natural gas pipeline project will deliver jobs and provide a boost to the economy in towns and villages all along the 800-mile route stretching from the North Slope to the Kenai Peninsula. After decades of talking about how to tap into the vast gas resources on Alaska’s North Slope, this project is poised to make that reality. The project passed a major milestone last month when the Alaskan legislature approved the required legislation to start preliminary engineering and design work – legislation that was recently signed into law by the Governor.

That work is scheduled to begin this summer about the same time Alaskans head to the polls to vote on a critical ballot measure that could bring all the progress and promise to a crashing halt.

Approving Ballot Measure 1 would return Alaska to an outdated tax structure, called Alaska’s Clear and Equitable Share or ACES, under which, companies avoided making energy investments in the state, and the state suffered financially for it. That oil tax structure was tied to the price of oil, making tax payments vary each month. Not surprisingly, it saw oil production decline sharply in the state as companies sough to invest elsewhere in places around the world with a more stable and predictable tax structure.

Last year, however, the oil tax was reformed by the legislature. The new structure enacts a higher base tax rate and sought to decouple the state’s tax from the price of oil. Companies supported – and support – the reform because it made the state a far more predictable environment to invest in. But that reform is now up for repeal this August.

By most accounts, the reform is working as planned. At Point Thomson on the North Slope, almost two billion has already been spent with more planned as the natural gas pipeline project progresses. Foreign entities like Repsol, have put Alaskans to work on new oil projects that never would have happened under ACES. BP and ConocoPhillips are investing billions to restore old North Slope projects and putting Alaskans to work. While local companies, like PRL Logistics, are spending millions preparing for gas. Overall, billions of dollars have been invested in Alaska and the law’s only been on the books for four months.

A repeal vote would return the state to the volatile ACES tax structure, which could be devastating for oil projects. But it could also imperil the new gas pipeline project. As the Alaska Gasline Development Corporation’s President Dan Fauske said, an oil tax repeal could “take this gasline and put it on the back burner.”

For the last six years, the State Department and the Obama administration have slow-walked the consideration of the Keystone XL pipeline. That pipeline is a $5 billion dollar project that’s expected to create more than 40,000 new jobs and thousands of dollars in fresh economic revenue. At nearly five-times-the cost, the Alaska natural gas project is expected to generate $4 billion annually for the state and an unspecified number of jobs. Yet, the number of jobs – and the state’s future as a leader in natural gas exports – seems to depend on the decisions Alaskan voters make when they head to the polls this August.

The companies estimate a cost of $45 billion to more than $65 billion (2012 dollars) for a project that includes a massive plant to cleanse produced gas of carbon dioxide and other impurities; an approximately 800-mile pipeline from Alaska’s North Slope to the liquefaction plant; and an LNG plant, storage and shipping terminal at Nikiski, 60 air miles southwest of Anchorage along Cook Inlet.

The 42-inch-diameter pipeline would be built to carry 3 billion to 3.5 billion cubic feet of natural gas per day. Alaskans would use some of this gas, and running the pipeline and LNG plant would consume some. The plant would have the capacity to make 17 million to 18 million metric tons a year of LNG, processing 2.2 billion to 2.4 billion cubic feet a day of gas.

The project is in the pre-front-end engineering and design (pre-FEED) phase, which is expected to be completed in late 2015 or 2016.

http://www.arcticgas.gov/alaska-lng-project

The North Slope oil discoveries of the 1960s and 1970s also found an estimated 35 trillion cubic feet of natural gas. The U.S. Geological Survey estimates an additional 221 trillion cubic feet of technically recoverable gas await discovery in Alaska's Arctic, onshore and offshore. By comparison, in 2012 marketed gas production from all U.S. fields totaled about 25 trillion cubic feet.

We can’t build this!

It will threaten the musky rat-kangaroo that lives in a tiny stretch of tropical rainforest on Australia’s northeastern coast!

http://blogs.scientificamerican.com/extinction-countdown/2014/05/16/climate-change-smallest-kangaroo/

(shakes head) What a waste. Why not build a gas to liquids plant at the slope and ship “white” diesel down the TAPS pipeline at a faction of the cost?

(sigh) Just another way for consultants to stick their snout in at the public trough to feed - this is just **another** project that will be studied to death, yet never bulit.

I think from what I read of Shell’s work at the Pearl plant in Qatar, it is significantly more cost, not less.

The product is worth more, so it balances out. But it is a very expensive plant and consumes a lot of energy.

I believe the technology also produces some significant volumes of high vapor pressure liquids that could not travel in the same pipeline, ethanes and other natural gas liquids.

So then for the same volume you are probably talking about a $35~40 billion dollar plant and still have to build another pipeline and export terminal facilities.

Much less

Sasol, an integrated energy and chemicals company, is about to start construction on a Gas-to-Liquid (GTL) facility and ethane cracker with downstream derivatives at its Lake Charles site in south-west Louisiana.

The total cost for the construction of the GTL facility is expected to reach ***$14bn***, while the ethane cracker will need an investment of about $7bn.

The GTL facility, upon commissioning, will have a production capacity of 96,000 barrels per day (bpd) of transportation fuel. The ethane cracker will produce 1.5 million tonnes per annum (mtpa) of ethylene. The ethylene producing facility is expected to come online in 2017, whereas the GTL facility will be commissioned in 2018.

And

Despite its long and successful history, there has never been , nor is there on the horizon, an example of an FT facility exploiting stranded natural gas at a remote location, nor of an independent gas producer (i.e., not integrated with a refining complex) monetizing gas via the FT process. All North Slope (Alaska) gas is stranded gas.

The total cost for the construction of the GTL facility is expected to reach ***$14bn***, while the ethane cracker will need an investment of about $7bn.

That is a much smaller plant. It does not take in 3.5 billion cubic feet of natural gas per day.

Also the plant is going to produce quite a few other products that would also have to get moved off the North Slope. Both light products with too high a vapor pressure to move in the existing pipeline as well has heavies like wax that also would be moved in the pipeline.

http://www.sasollouisianaprojects.com/userfiles/FACT%20SHEET%20-%20SASOL%20GAS-TO-LIQUIDS%20FACILITY(1).pdf

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