Senator Johnny Ellis on Gasline Goals

June 20th, 2008

GASLINE GOALS

Friends and Neighbors,

I took an oath to the Alaska Constitution to develop our resources for the maximum benefit of the people of Alaska . In order to fulfill that oath, I have four bottom-line goals for a gas pipeline:

- Get an economic project moving now
- Good jobs and business opportunities for Alaskans
- In-state use of our gas
- Maximum revenue for the state
- Foster a gas exploration rush on the North Slope through an enhanced open-access pipeline. This is where the most long-term jobs and state revenue will come from.

Point Thomson

As the on-going statewide gas line hearings have progressed, a variety of topics have come to the forefront. This week’s discussions in Anchorage have centered around the dispute between the State of Alaska and ExxonMobil, the operator of the Pt. Thomson oil and gas field, and the effect it could have on a future gas line.

Historical Timeline of the Pt. Thomson Unit

- 1975: Hydrocarbons are first discovered in the area
- 1977-1983: Exploration continues, with 7 additional wells drilled and two other distinct units identified
- 1990’s: Hydrocarbons are discovered at Badami, just west of Pt. Thomson. Production begins in 1998.
- 2006: Exxon’s 23rd Plan of Development is rejected by the Murkowski administration, and the rejection is upheld by the incoming Palin administration.
- Today: The State is in litigation to recover the leases from Exxon on the grounds that they have failed to produce the resource in order to re-lease the lands to a willing partner.

According to the state Department of Natural Resources, Pt. Thomson contains between 8.5 – 10.4 trillion cubic feet of natural gas and between 1 – 1.5 billion barrels of oil. This oil is in two parts – an oil rim around the gas reserves and a condensate form which is mixed in with the gas.

Under Alaska law, resources must be produced to minimize waste. Because of the mixture of oil and gas and the specific geologic and chemical properties of the basin, the oil must be produced before the gas if it is to be produced at all. This means that gas production must wait to get underway until most of the oil has been recovered, which most estimates put at 10-15 years.

What does Pt. Thomson have to do with AGIA?

Exxon claims that no gas pipeline is economic without the additional gas that Pt. Thomson would produce. The state and independent economists dispute that, saying that the combination of Prudhoe Bay and the extensive but undefined resources on the rest of the North Slope are more than enough.

This debate raises a number of questions. First, the major North Slope producers, including Exxon, proposed a gas pipeline of similar size and scope under the Murkowski administration. The geology of the Pt. Thomson field and legal production requirements have not changed since that time. Second, BP and Conoco, also owners of Pt. Thomson leases, have proposed the Denali pipeline, which is designed to carry an equal amount of gas. What is it about these proposals that allows them to go forward, while dooming the plan that the administration and TransCanada have put forth?

The statewide road show will continue through the next two weeks in Palmer, Soldotna, Barrow, and Ketchikan , and these and many other questions will continue to be addressed. The legislature will reconvene in the capital on July 9th. I predict a lively debate and a final vote before the middle of July.

Summer Solstice

Tomorrow is the longest day of the year – I hope everyone has a chance to get outside and enjoy summer. There are a number of fun events, from running (or cheering) at the Mayor’s Marathon and Half-Marathon at West High School, to AWAIC’s summer solstice festival at the Park Strip, or maybe just time with family and friends before winter starts to creep up on us all once again.