Alaska gas: We might finally be on a path to getting it to market

road forward Ken Cohen, vice president of public and government affairs for ExxonMobil Corp., wrote a blog post about Alaska’s natural gas pipeline entitled, ‘Will the energy revolution go ‘North to the Future?’”

His answer: Yes, if the producers including Exxon and the State of Alaska, can get along and pass “fiscal terms” in the upcoming legislative session.

“Though Alaska has long been considered a leading energy-producer, it hasn’t been regarded as a key part of the current, largely shale-driven supply revolution that is creating a new era of American energy abundance,” Cohen wrote. “An agreement that Alaska officials brokered with a number of industry participants last week could go a long way to changing that perception.”

The agreement that he’s referring to was signed on Jan. 14 by Gov. Sean Parnell’s administration and the producers–ExxonMobil, BP, and ConocoPhillips–as well as TransCanada, which would build the line. Among other things, it involves the state taking between a 20-25 percent equity stake in the project, which is expected to cost between $45 and $65 billion.

The fact that Cohen, one of Exxon’s most public and prominent executives in the company, is writing about it means that Exxon is anxious to get this project going, which has not always been the case.

For more than 30 years, Alaskans have watched as plans to build the more than 800 mile pipeline have come and gone. The market simply wasn’t ready.

People bought property based on a headline in 2008, proclaiming that the pipeline project was all but a done deal. It wasn’t.

I wouldn’t yet buy property based on the current plan, but it is different than any of the previous plans. The last time, under Gov. Sarah Palin, the big producers–including, initially, Exxon–were cut out of the building process, and therefore had less control over the profit margins and at what price smaller companies paid to ship their gas. TransCanada had the license to build the line, but the producers weren’t playing and wouldn’t commit their gas.

So, it failed. Call it unfair and anti-competitive, but the producers have rights over the leases. (It might be our gas and oil, but barring a huge court challenge–one that would make the Exxon Valdez court challenges look expeditious in comparison—they are lease terms that we agreed to.)

This time, for the first time ever, BP, ConocoPhillips, Exxon and the state all agree on a path forward.

In the blog post, Cohen calls for the legislature to iron out “certain fiscal terms” this legislative session.

Such terms involve the state moving from a net to a gross tax. Currently, the state taxes gas much like it does oil and at about the same rate, even though oil is much more profitable than gas.

Parnell deserves credit for working diligently and quietly behind the scenes to get the state this far. But this is a hugely capital intensive investment, unlike anything the state has ever dealt with. The stakes couldn’t be higher, and he will need a groundswell of public support behind him.

Parnell hasn’t yet proven that he’s adept at reaching out to the public to get that kind of support. He’s not yet had to, and without it, it could very well fall apart, particularly because it’s an election year. It’s happened before: just ask Govs. Frank Murkowski and Sarah Palin.

Too, legislators, particularly those in the opposing party, will have to do their best to resist taking politically-expedient pot shots, which they haven’t been adept at doing either.

Gubernatorial Democratic candidate Byron Mallott said on Saturday that although a lot more work needed to be done, it appeared that the agreement was a “step forward” in getting the pipeline built.

Mallott was being a statesman. Maybe it will catch on.

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3 thoughts on “Alaska gas: We might finally be on a path to getting it to market

  1. Lynn Willis

    Thank you. Without a long term commitment from all the producers and the AOGCC, we should not proceed. Perhaps with that commitment even absent a contract from a purchaser we could adopt a “build it and they will come” strategy hoping that consumers would be interested; otherwise not a dime toward yet another pipeline dream.

  2. Lynn Willis

    I sugest that nobody is asking a very important question – where exactly is all this gas that supposedly is available for export? A couple of years ago I attended a legislative hearing regarding gas. At that time a representative of the AOGCC (Alaska Oil and Gas Conservation Commission) stated that the proposed half-billion cubic feet per day allowed under AGIA to any other project was probably acceptable which would have made the “bullet line” volumes acceptable; however, the volumes for either the AGIA or (then) DENALI line would not be supported. Now two years later on December 20th 2013, on a local call in radio show, I asked the same AOGCC representative how much gas they would now support releasing from the North Slope. The answer was zero, later clarified as “zero point zero” because, as two years ago, natural gas is better used to extract oil which is much more valuable to the state than the gas.

    So until we can get a long term commitment to release gas from all the producers and that commitment is supported by the AOGCC we are wasting even more of our own time and money.

    We haven’t have had a gas line because the “market wasn’t ready”? If you believe that, you might fall for this next mirage. After the recent earthquake in Japan and the Fukashima disaster that soured Japan once again on nuclear energy what happened? Conoco gave up the only export license in the U.S. in Cook Inlet and closed the Kenai export faculty. If that wasn’t conditions for a ready market I can’t imagine what is. Now the Governor is asking them to reapply for that license as part of this latest feint.

    Alaskans have every right to feel like Charlie Brown once again listening to Lucy promise to not pull away the football. We should not invest another dime in any gas line project until we are told that sufficient gas is truly available for export. In the mean time ask your elected officials what is the “drop dead” date to begin the effort to import LNG into Alaska because Cook Inlet contracts are only good through 2018.

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