While I was in Alaska last september for the American Fisheries Society annual meeting, a front page story was the dealmaking between the governor and the oil companies over a new natural gas pipeline. The fight sounded ugly but it sounds like a deal was made (Tricky Years of Maneuver Ahead for Proposed Gas Pipeline):
A conditional agreement between Alaska and three big energy companies may be, as Gov. Frank H. Murkowski put it, a milestone toward building a natural gas pipeline.
But significant political, environmental and regulatory hurdles must be overcome before a single section of pipe meets a welding torch.
After prolonged negotiations, Governor Murkowski announced late Monday that Alaska had reached an agreement in principle with BP, ConocoPhillips and Exxon Mobil to build a $20 billion pipeline from the North Slope to the lower 48 states by way of Canada.
As envisioned, the pipeline would move 4.5 billion to 6 billion cubic feet of gas daily and begin operating sometime from 2012 to 2014. Alaska has an estimated 35 trillion cubic feet of gas reserves.
But, as the title of the NYTimes article indicates, don't get excited just yet.
First, just like with oil in ANWR and other supply-based solutions to our energy addiction, the amount of homegrown natural gas is underwhelming and would probably have a small effect on prices:
The idea of increasing American gas supplies using American sources has obvious political and national security appeal, particularly given that the fuel is increasingly used as a substitute for coal in electricity-generating stations.
André Plourde, an energy economist at the University of Alberta in Edmonton, said that the world's largest known gas reserves were concentrated in countries not known for political stability, notably Iran and Russia.
"Given the Bush administration's focus on what it considers to be energy security," Mr. Plourde said, "Alaska is going to get a favorable hearing."
But if natural gas prices drop from their current levels, as many expect, economic concerns may outweigh the emphasis on security. If the forecasts of Professor Tussing and others bear out, gas piped from Alaska will have a difficult time competing with gas shipped by tanker from low-cost producers overseas.
Professor Tussing estimates that North American gas reserves are now about 9.5 times annual production. Reserves elsewhere, by contrast, are 88 times production.
"That means it is a lot easier to increase production almost anywhere other than North America," he said. "We have pretty much wrung out the continent."
And environmental regulations, the bane of energy companies, will get in the way:
Climate change may also complicate environmental reviews. Antoni Lewkowicz, a professor of geography at the University of Ottawa, worked on permafrost issues surrounding an Alaska pipeline plan more than 20 years ago. A pattern of warming weather in the Arctic today, he warned, will make engineering the current proposal difficult and costly.
"One of the things that killed the pipeline back in 1982 was the expense of the permafrost accommodations," Professor Lewkowicz said. "Today, it's going to be very difficult to come up with a design that can deal with current conditions and the climate changes that will occur over the next 30 to 50 years. It's a significant and very costly engineering challenge."
