Community Perspective
A national energy conflict of interest
Candidate Palin may have different goals than Gov. Palin
Published Sunday, September 28, 2008
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Stumble It!The natural gas pipeline is Alaska’s most important issue right now. Not only does it mean jobs, but much more vitally, it means billions in state revenue across the next 40 years. While it is important to get the pipeline quickly, more important is to get the best deal possible.
That requires a strategy.
The governor’s current Alaska Gasline Inducement Act strategy has been to secure a pipeline builder, TransCanada, to start the process of getting a Federal Energy Regulatory Commission certification, but not to engage the producers directly. Indeed, in Gov. Palin’s letter to the producers, dated Jan. 9, 2008, she states, “The state does not need to back track to the Stranded Gas Development Act (SGDA) approach of mixing production economics (i.e. production taxes and royalties) with pipeline development. The state had several good-faith proposals to build a pipeline under the Alaska Gas Inducement Act (AGIA) without any requirements to first modify upstream tax and royalty obligations.”
That should mean no negotiation is needed with the major North Slope oil producers, who own the natural gas leases.
Yet on Sept. 9, 2008, after Gov. Palin became vice-presidential candidate Palin, she suddenly announced that she intended to contact the producers to discuss their involvement in a pipeline. What could that mean?
It cannot mean that AGIA is working, since if it were working, there would be no need to call up the producers to discuss anything. That means SGDA-type negotiations are needed — the opposite of what the January letter implied.
Does that mean Palin has made a mistake with AGIA or with her January letter against negotiations? Or does it mean her current position as a GOP candidate for federal office has put her into a position where she could be pressured to put U.S. interests ahead of Alaska’s need to get the best deal possible?
What I see with Palin’s attempt to contact the producers is not an admission of a mistake with AGIA but rather a compromise of Alaska’s interests. I have argued all along that negotiations with the producers are going to become necessary, but to do so under the pressure of vice presidential aspirations when the Outsiders are saying, “Where is my cheap energy, Ms. VP?” may mean Alaska’s interests will play second fiddle to the needs of the Lower 48 states. It may mean she will capitulate to producer demands and reduce the state’s take — just to get something, anything going.
Even should the McCain-Palin ticket fail this year, there is the chance of another campaign in four years and Gov. Palin under pressure from the national party to get a deal done. We need a strong independent negotiator, not a perpetual, presidential hopeful to stand for Alaska’s interests and not Lower 48 interests.
By saying to the American public in this presidential campaign that she is poised to start the flow of cheap natural gas to the nation, not only is Gov. Palin exaggerating the truth, but she is acting against the interests of our state. Why? Solid negotiations must include brinkmanship — the credible threat of delays from both sides. By promising natural gas sooner rather than later, Palin has diminished her ability to tell the producers that she will go to any lengths, such as a 10-year lawsuit, to get the best deal that the producers can offer.
Palin should admit AGIA is flawed. She should then negotiate with the producers directly — not as the vice-presidential candidate or as a future candidate — but as the governor of our state. Unlike other presidential and vice-presidential hopefuls that are state governors, our governor has a conflict of interest with a national candidacy: maximizing our state’s resource value even if it means higher Lower 48 energy prices. No other state governor faces such an issue as critical to its future as Alaska faces today. Tens of billions of dollars in revenue during the course of the next 40 years are at stake. We need our governor to be here, with no presidential conflicts of interest for the foreseeable future, to cement a deal that is good for all Alaskans.
Many Alaskans are proud that Palin was chosen to run for the vice presidency, but that does not preclude her responsibility to take care of this crucial order of Alaska business even in the face of counter interests coming from the McCain campaign or future presidential bids.
We need Gov. Palin, not Vice President Palin.
Doug Reynolds, Ph.D., is an associate professor of oil and energy economics at the University of Alaska Fairbanks. He can be contacted at ffdbr@uaf.edu.
Community Discussion
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Doug, you have completely missed the big picture in your piece.
The fact is the oil and gas journals are full of articles about the massive natural gas/shale deposits being discovered within the Lower 48 and Canada.
Thousands of trillions of cubic feet. HUGE deposits.
What does this mean? It utterly changes the economics of the pretend gasline to the Lower 48. One does not spend 40-60 billion dollars on a gasline to carry gas to a market that is already saturated with natural gas.
It does not pay. One can not amortize the gigantic cost of the project.
Add one more problem. Some LNG receiving terminals on the Gulf coast are operating at less than half of their capacity. Exxon can bring in gas out of Qatar and flood regional gas markets. Again, this does not create an economic inducement to spend 40-60 billion on a gasline out of Alaska to provide for those markets.
Are you a real professor, or a pretend one like the one on Gilligan's Island?
CEO - there's no reason to be rude just because you think you know something the other person doesn't know. In fact, your comment is completely out of context. Dr. Reynolds wrote a piece about what Alaska needs - Alaska needs a gas pipeline. And, Palin works for Alaska, which means she should be focusing on Alaska's needs. He didn't write a piece about the worldwide availability of gas. I actually disagree with him on one point - I don't think we need Palin as governor or VP. We need someone a lot smarter who accepts input from a diverse group of intelligent advisors.
Akjak- you raise interesting points. The problem is Reynolds is uninformed and naive in the extreme. First he argues for a gas line that is not economic for the reasons I offered above (building a gasline to a market that is saturated with gas).
Second, he argues for negotiations with Big Oil to build a gasline that is not economic. How do you successfully conclude negotiations to do something that is not economic in the first place?
Third, Big Oil does not want to open up the North Slope basin. They have other reserves throughout the world that become less valuable when the North Slope Basin is opened. So as long as they can keep naive Alaskans believing that the only thing holding back a gasline is some special, super duper negotiation, then our gas will stay in the ground, and Alaskan will suffer.
You might recall Murkowski spending most of his four years chasing his tail negotiating with Big Oil. In the end he was discredited as a fool willing to ignore the Alaska Constitution and give away Alaska's oil for a few generations to induce a gasline deal.
Total insanity.
The way forward is for Alaska to build our own line. We give the world notice that on a date certain we will have the line available to ship gas. This allows the independents to get to work on opening the 234 trillion cubic feet of reserves.
Most fail to realize that the amount of gas in reserves controlled- and being illegally withheld from a gasline- by Big Oil are not enough to stop this project. It is the undeveloped gas reserves that hold greater quantities of gas than what is held at Prudhoe Bay- that can fill a gasline, initially.
The newly opened reserves, coupled with Alaska using our own royalty gas that we can take as RIK (Royalty in Kind) versus RIV (Royalty in Value- as we do now) plus a line that can be expanded by additional compression puts Alaska in the driver's seat.
Those who tell Alaskans that the only way to build a gasline is for Alaska is to get on our knees and negotiate are ignorant of history, economics, and the real options we have as a SOVEREIGN state that OWNS the gas.
Yes, I absolutely agree with you - our market for gas is US. We need to build an Alaskan gas pipeline for Alaskans, which is why I don't really care about the lower 48 market. What do you think of the plastic pipeline idea, by the way?
Akjak- HDPE pipe should absolutely be looked at in detail either as a bridge pipe, or as part of a multiple runs. DNR needs to be convinced to go from North to South, instead of the foolish idea of building a gasline from where the reserves are depleting- Cook Inlet/Kenai to points North.
Fairbanks is spending hundreds of millions of dollars per year more for energy than they should, and that makes a quick installation of HDPE as a bridge very attractive.
The idea of HVDC line from North to South should also be evaluated against a plastic pipe. No options should be ignored.
First gasline over the Brooks wins!!!!
http://s281.photobucket.com/albums/kk209...
Almost 20k viewers to my slideshow, more everyday
Did you know that if you sink a subsea HDPE-gasline below 1500'deep it will carry methane in dense-phase?
It will be much cheaper than you think to build a 24" subsea gasline from Valdez to Sitka, Port Angeles, Grays Harbor.
GTL is making big progress too...
http://www.youtube.com/watch?v=gPe2rXTte...
http://www.synfuels.com/
Alaskans need to build our own HDPE-pellet plant on a big barge or ship. Prudhoe gas is 10%ethane, from our royalty ethane we can be making our own HDPE-pellet for 35cents/lb. With our own HDPE-pellet we can make SDR-7 4" hdpe-gasline for less than a buck per foot.
A 4" LPG-gasline can carry 200,000gallons of propane per day.
Prudhoe is 6% propane.
http://newsminer.com/news/2008/sep/28/fa...
Just let me know, I'm waiting
.....flash/rumble
Then why can't we make our politicians move this forward. Fairbanks needs the gas.
Keep in mind Vaporizers might be a nessasary evil w/ widespread general propane usage in the interior.
Here comes another winter and I would hope those in state government who should have been paying attention to these posts and threads will do so now.
Everything we need to know has been articulated quite succinctly in the above comments.
The absurdity of shipping declining Cook Inlet gas reserves north is the height of folly and obfuscation.
Do we need to start a ballot initiative to break this log jam?
These sentiments are state-wide and the manifold reasons for an All Alaska line are only becoming more evident every day.
Thanks to all of the above posters for their input.
Let's keep this ball rolling and force "them" (whoever they are) to address these realities.
gregg228-------
Vaporizers at -20F is one way to deal with cold propane.
I used to go out and pee on my propane bottle, the big yellow ice blob kept my neighbors from stealing my gas.
Prudhoe gas condensate is ethane/propane mix, if we distribute ArcticMix LPG vaporizers aren't needed. ArcticMixLPG = 80%propane 20%ethane.
===========
I predict HenryHub gas will continue a long general trend of decline.
New[old] technologies are making plenty of gasses out of garbage.
China and Australia are moving forward with UCG [underground coal gasification] drilling into coal seams and zapping the coal with microwaves.
PeakOil&Gas is an illusion.
The new trend is decentralization of the market monopolies by widespread distribution of small-scale hydrocarbon sourcing/processing equipment.... every village worldwide can now find, make, &use it's own gas to make liquid transpo fuels.
BTL biomass to gas&liquids is booming in Indonesia.
http://www.globalresourcecorp.com/Engine...
Microwave superheterodyne hydrocarbons will revolutionize the way we source, process, recycle all hydrocarbons..
..including every step in making plastics.
For the next 20+years the new drillrigs using flexible-tube & hydro-cracking tech will open up huge untapped gas reserves in the Lower48. This will give Alaskans time to succeed at recovering the lost-orphan gas sublimating to the 4winds on the slope from the gas-hydrates unlocked in the permafrost.
at the moment..
Listening to the radio..
If it were up to me I'd replace WallStreet and WARshington with a vending machine, anybody who wears a necktie at work can now be replaced with a string of algorithms in software published on a CD.
Yeah, filibuster until the Majik Show is shown to be the fraudulent travelling circus of gypsies and grifters it really is.
Anyone think we'll see a gas pipeline anywhere in the future?
=============================
Alaskans building our own HDPE-gaslines doesn't require complex financing or help from Juneau.
It only takes a bunch of us to get together and start a Gas-Cooperative.
Starting small is the key.
Maybe just buying a couple of LPG-tank trucks, and start the biz like grandpa did, just one penny at a time.
The point being we should have bonded for an All Alaska Line rather than waiting for the crash which has probably dumped the Permanent Fund of several billion alone today.
The whole B.S. of these markets has been obvious to anyone with 1/2 a brain for the past several years but that sure didn't inspire the Perm Fund board to get off its collective ass and actually hedge for Alaskans rather than join the immolation by playing with the hedge funds which are one of the main causes for the meltdown.
Even if we start an Alaska line today the world will be pulling out of this slump before we could even get it built, be that 5 months or 5 years
and in the meantime we could at least have affordable energy in state upon getting it built.
DT, cant find very much much info on this Arctic Mix LPG-e. Did a yahoo search and 4 hits.
Is arctic mix lpg's properties very similer to propane?
I ask as I have converted many nat gas to propane/propane to natural systems in lower 48 and have concerns about arctic mix lpg-e usage potential in the AK interior. Gues I aint been up here long enough to heard of it before.
As far as I recall, ArcticMix has never been commercialized...yet.
So far it's only been bootlegged by gas-heads who work in the industry.
ArcticMix propane/ethane works best with gentle agitation of the gas-bottle. So, if your stove-flame is poopy at -40F you just wiggle the bottle a little, you don't have to pee on it.
I wonder what Doug Reynolds thinks about the petro-nomics twist of the emerging technology of the Superheterodyne Hydrocarbon.
Microwaves can be used to selectively heat specific parts of simple and complex hydrocarbon molecules...
http://www.globalresourcecorp.com/Engine...
..everything from methane to plastics,from UCG-underground coal gasification to recycling rubber-tires...
and efficiently making GTL too.
http://www.alaskajournal.com/stories/100...
Can Dr.Doug figger out the petronomics of using microwaves, and retooling TAPS to ship gas instead of crude??
If TAPS was a gasline then we could batch ship propane quickly from the slope, then switch to a batch of ethane for the new petrochem industry in Kenai [the 1tcf of ethane can be stored underground there], then ship a batch of methane to reinflate the rest of the CookedInlet underground storage for LNG, then ship more crude to Valdez, then switch back to gas....
..all this can be done by reconfiggering the pumpstations AGAIN, and pushing pigs with lipstick thru the pipe.
[Sarah !!! point that gun over thattaway dang it!!]
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