THOUGHTS ON THE “DENALI ‘THE ALASKA GAS PIPELINE’”

“Bully” for the folks behind the “Denali ‘ The Alaska Gas Pipeline’” announcement. Alaska now has two serious potential pipeline builders. That’s good news. But please, a cautionary note.

As BP Exploration Alaska president Doug Suttles aptly put it, “This is not an announcement to build a plan. This an announcement to start the project." As one of my colleagues pointed out, a company press release is not a proposal that upon acceptance can become a contract. The numerous disclaimers attached to the press release makes that abundantly clear.

Before "Denali" gets off the drawing board and dirt is actually moved, BP and ConocoPhillips must first reach agreement with the Palin Administration, and gain subsequent approval by the legislature. I do believe, however, that TransCanada, BP, and ConocoPhillips are all sincere in wanting to build the pipeline. I also suspect that all of them will eventually seek extra financial concessions before any of them signs on the dotted line. That may be OK, if it makes economic sense, and so long as we don’t “give away the store” as our previous Governor Murkowski seemed comfortable doing.

The biggest unknown at this point is what the true cost of the pipeline will be. What is known, is that each day we delay the cost will increase, and each day we run the risk of lower gas prices that could lessen enthusiasm for building the pipeline. Ergo, we need to proceed with any of these pipeline folks with all deliberate speed.

It was encouraging that US Senator Lisa Murkowski stated, "Gov. Sarah Palin should be congratulated. By her tough stance over the past two years, she has brought the companies around to building a gas line now." The senator added, "It is unlikely this announcement would have come today, if not for a process like AGIA that has crystallized the outlook for development of Alaska's North Slope gas reserves." Let me add on my own that, along with our euphoria, we shouldn’t forget the “must haves” that form the basis of Governor Palin’s AGIA

If things pass muster, I think the administration should take the TransCanada AGIA proposal to the legislature for us to consider during the Special Session scheduled for June 3rd, 2008. That will give 60 elected representatives a direct "say so" in what happens. Just as importantly, the special session will help keep political pressure on all the gas pipeline players.

What I hope – and hope springs eternal – is that TransCanada and the Denali people can partner up with negotiations taking place behind the scenes. The gas pipeline, if the resource and market is what we think it is, can provide huge profit potential to a large number of “partners,” whoever they are. Permit me to state the obvious. If money can be made, someone – or some combination of “someones” - will build the gas pipeline. That’s true, for anyone. It’s called capitalism, and I’m in favor of it.

Now let's add to the mix (as if things weren't complicated enough). Don’t forget that negotiations are also heating up for an All Alaska Pipeline from the North Slope to Valdez for liquid natural gas (LNG). This approach to shipping our gas to market is popular with many Alaskans, and not a few legislators. A major advantage of an All Alaska pipeline is that we wouldn’t have to deal with Canada which, long time friend though they be, Canada is still a foreign sovereign nation – and their interests aren’t always aligned with ours (remember the divergence on missile defense?).

What will be the international situation in twenty years? Who will be the President of the United States in twenty years, who will be the Prime Minister of Canada, who will leader of the Yukon Territory and Alberta, and who will be the governor of Alaska? Contact Mistress Latisha on the Psychic Network – maybe she knows. The point is, it's easier to deal with Alaska in-state problems than problems involving two nations, a foreign province, a foreign territory.

Moreover, whoever builds the gas pipeline and whatever its route, Alaska desperately needs gas spur lines to south central Alaska, the Fairbanks area, and other places too.

The cost of the Denali pipeline could reach $30 billion. On the other side of the coin, such a pipeline could inject some $100 billion in tax revenue to the state. In words from an old time radio show, “’Taint bad, Magee.”