A Citizen’s Guide

There’s lots of questions about the port authority that are kind of critical, like where the project would get gas, how it would be financed, and whether it would undermine a bigger project later.

Rep. Paul Seaton, a Republican from Homer, asked another one after sitting in for much of the port authority’s presentation last week to the Senate Special Committee on Natural Gas Development.

Is the port authority right that developing North Slope natural gas doesn’t require state concessions? That is, that it doesn’t need the state to take taxes and royalties as gas, share in the investment of the pipeline, or agree to freeze taxes for decades? And what does that do to the gas line debate?

Pedro van Meurs, the governor’s lead adviser on oil and gas issues, had said in so many words that if the oil companies could choose between their project, which does require those things under the proposed contract, and the “all-Alaska” line, they would choose theirs.

A gas pipeline project in Alaska needs a stranded gas contract because it’s so big and risky, according to van Meurs.

“This is a monster mega-project,” he said.

But Seaton wanted to know if the port authority project, which would start out at just 1.2 billion cubic feet per day instead of 4.3 or greater, would also require a stranded gas contract.

The third time Seaton asked, van Meurs said he didn’t know.

“I haven’t studied enough the details,” he said.

Seaton said if it was true that the port authority didn’t need concessions and true that oil and gas lease holders were required to develop the gas if it was economic to do so, then he would like to see comparisons of revenues to the state.

“Those are the comparisons we need to look at,” he said, “and I haven’t seen those.”

Essentially the question is this: If the oil companies’ proposal is more profitable but requires concessions from the state, is it still in the state’s best interest?

A study by PFC Energy dated March 17 found the port authority project offered a lower netback value (the price of the gas minus the costs of producing and transporting it) to North Slope gas, and while state revenue is tied to netback to a large extent, netback figures don’t specifically answer Seaton’s question.