Monday, February 7, 2011

Alaska Pipeline One Step Closer to its Grave

On Friday, several members of Alaska's legislature filed a bill to force the state to abandon its plans for a new natural gas pipeline to link the orphaned gas in the North Slope to markets in the Lower 48.  The so-called Alasa Gasline Inducement Act (AGIA) provides seed financing of $500 million from the state to fund the project and was one of former Gov. Sarah Palin's advertised successes.  But what nobody predicted at the time was the rise of shale gas in the Lower 48, which flipped the supply paradigm on its head and cratered commodity prices (nobody predicted the magnitude of the recession either, for that matter).  

We've talked about it in these pages for the past couple of years, but now that foes of the project are taking concrete steps, we might know in the next six months if the project is a "GO" or not.  If the project doesn't work, the logical alternative is an LNG export facility. Given the state's proximity to Asia (you know, you can see Russia from there), it makes a lot of sense.  It too would be an expensive undertaking, but other than Asia, I'm not sure what markets exist for North Slope gas at this time.

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