Palin's Gas Pipeline Isn't Hot Air

Source: http://www.ibdeditorials.com/IBDArticles.aspx?id=303693123946167

By INVESTOR'S BUSINESS DAILY | Posted Friday, August 15, 2008 4:20 PM PT

Energy: As congressional Democrats dither on a vote for oil drilling, Alaska Gov. Sarah Palin has pushed through a gas pipeline project to bring new supply and price relief to the lower 48.

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On Aug. 1, the same day the call for a vote on drilling began on the House floor, the Alaska state Senate approved a package of measures to license a new natural gas pipeline. House Bill 3001 lets Palin award the Alaska Gasline Inducement Act license to TransCanada Alaska, a pipeline builder that cast a winning bid of five.

The legislature had been trying for 30 years to authorize something like this and, up until now, had blown it. Palin got it through. Getting it off the ground, the state says, will be the biggest construction project in U.S. history.

Palin considers the $26 billion project her biggest accomplishment as governor. "It was not easy," she told IBD. "Alaska has been hoping and dreaming for a natural gas pipeline for decades. What it took was getting off the dime and creating a competitive market in Alaska."

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The 1,715-mile gas line would stretch from Alaska's North Slope to Fairbanks and down to Alberta, Canada. Then it would take existing gas lines to Idaho. In 10 years, Palin says, the lower 48 states would receive 4.5 million cubic feet of natural gas a day. By 2030, according to Energy Department estimates, Alaska's annual natgas production would quintuple to 2 trillion cubic feet.

Minus a pipeline, Alaska's abundant gas largely ends up pumped back into the ground to be used to pressurize oil fields and aid in extraction. With oil production in Alaska's Prudhoe Bay region declining and Congress continuing to drag its feet on new oil drilling, one of the few things Alaska can do is sell some of the gas now.

The new supply could bring price relief to anyone who uses home heating, electricity, farm fertilizers or manufactured goods in the U.S. "Not only is this economical for all players involved; it's wildly needed," said Palin.

The pipeline does spark controversy. Two of Alaska's biggest three oil producers, BP and ConocoPhillips, think the state is too involved. They are working on a gas line project of their own called Denali.

At first glance, it would seem the more gas lines, the merrier. But neither Palin nor BP/ConocoPhillips thinks more than one multibillion dollar gas line will be profitable, based on what's known of Alaska's resources. So both sides think the projects may eventually merge.

BP/Conoco argues that its gas line will be more efficient, but Palin's project has something a little different — political viability, something that could smooth the path to production at a time when activist lawsuits and protests gum up production as badly as Congress does.

Although a package of state goodies demanded by various constituencies could add costs, it also could be a trade-off to actually getting the project off the ground.

Palin justified it this way: "We wanted this in a competitive environment and asked companies what they could offer Alaska. Alaska is going to lay down the law (and) say, 'If you want to build this line, here is what Alaska must have: protection for the environment, in-state use of resources, jobs for Alaskans.' "

The job isn't done, but Palin isn't going on vacation.

"We still have so much to do — to break ground, to build," she said. "We'll keep ramping up oil production, educating Congress to allow ANWR to be tapped and to prove we can ethically and responsibly drill so Alaska can produce for everyone. Alaska should be the head, not the tail, to the energy solution."

Small wonder, then, that Alaska has one popular governor. If only congressional Democrats could also get off the dime.