Planning for Mega-Project Success

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					Planning for Mega-Project Success

                Challenges and
                Opportunities of the
                Alaska Gas Pipeline
Development of Alaska Natural
Gas—40 years and counting

   1960’s Discovery of North Slope Oil
      – 30 trillion cubic feet of natural gas
   1970’s Canada-US Treaty, Presidential Selection
   1980’s De-regulation of US natural gas, pre-build of gas
    lines from Canada to US
   1990’s Canada movement toward a market approach;
    depletion of giant fields; supply and price concerns
    2000’s Serious efforts toward project approval by North
    Slope producers
The Project

   4000 mile high-pressure buried natural gas
    pipeline from Arctic Ocean at Prudhoe Bay,
    Alaska to Chicago, Illinois
   World’s largest natural gas treatment plant,
    bordering the Arctic Ocean
   Potential intermediate Natural Gas Liquids
    plant in Canada or US
The Gas

   Prudhoe Bay, Point Thomson, other fields
    leased by BP, ExxonMobil, ConocoPhillips
   Oil produced at Prudhoe, produced gas is re-
   Point Thomson not yet on-line
   Total gas 30+ trillion cu ft
   Around 6% of US annual demand, 30+ years
US Demand for Natural Gas

   Increasing year by year
   Clean Air Act, electric power plants
   Combined cycle plants
   Less seasonally driven
   Nationwide gas transmission lines, delivery
   Often the preferred energy source

   Depletion of giant fields
   Disappointing conventional discoveries
   Barriers to entry
   Emergence of coal-bed methane
   Tight sands technologies
   LNG terminal projects
   Rising costs
Price per mcf

   Since 2000, $2.00 - $14.00 and higher
   $7.00 or so today
   Even at $7.00, projects being delayed or
    canceled (high costs)
   Just during 2001 Producer pipeline study,
    price moved from $10.00 back down to $2.00

      What will be the price between 2020 and 2050?
Fun with numbers (and people)

   48-52 inch steel pipe, buried 4000 miles from Arctic to
    Chicago, high pressure (2000-2500 psi)
   World’s largest natural gas treatment plant on the
    Arctic Ocean
   Hundreds of miles in permafrost
   Most seismically active zone in North America
   All pipeline steel produced for 2 years, worldwide
   7 Alaska tribal regions, 15-25 First Nations, State lands
   $40 billion?
   12 year project?
Environmental Challenge

   Salmon-spawning streams
   Animal migration
   Historic preservation
   Culturally-significant sites
   Native lifestyles
   Transportation, other human land uses
   800 mile trench across Alaska
   Permafrost  “Breakup”  SOIL EROSION

   50 million man-hours
   In harsh environment
   In winter
   In dark
   Along Alaska Highway
   High pressure pipeline
   Local hire and training mandates
Risks & Barriers to Project Success

   Taxes and royalties
   Price of steel
   Price of labor
   Engineering challenges
   Stakeholder interests
   Political leadership

               Stable business environment
            largely influenced by governments
Project Planning 2001ff

   150 people, $125 million
   Technical, environmental, land issues
   Costs and schedule
   80% ready for FERC application
   Support of major Alaska Native communities
    and significant support of First Nations
   Right-of-way through State lands
   Draft fiscal agreement

   State rejected fiscal agreement
   State doubled “government take”
   New State law set up process to pick one
    preferred pipeline project and company
   State picked TransCanada, promising $500
    million to plan, permit a project
   BP and ConocoPhillips pursuing “Denali
    Pipeline” project independent of TCPL
   Viability of any project remains uncertain
Success or Failure?

   Producers spent millions
   State raised taxes
   Huge increases in costs
   State added barriers to success
    –   Project sanction legislation
    –   Point Thomson lease revocation
   Disappointed stakeholders
   Sunk costs, no returns
   But…with all that…
What if companies had proceeded
in 2001…?

   Unforeseen steel demand/price
   Unresolved First Nation issues
   Unanticipated market/supply issues
   Faster depletion of Prudhoe oil resource
   Even worse-case State tax and royalty
   Financial system crisis
   Yes, but…
The State’s action has been fatal

   Canada Good Will
   Large First Nation Support
   Native Alaskan Sanction
   Congressional Approval

        The government with the most to gain has
        thus far thrown up the greatest roadblocks
What next?

   While planning for this project, local political
    opposition killed two other energy projects in Maine
    and California, and many others
   Despite the Supremacy Clause and Eminent
    Domain, the Federal Government has no solution to
    state and local stonewalling on energy project
    permits and public/community landowner issues
   While we focus on the price of gasoline, and dream
    of alternative energy, we continue to tolerate locally
    politicized barriers to execution of even the most
    environmentally friendly energy projects of the future
An essential consensus
A new way to move forward

   We need a new focus on state and local barriers to
    essential energy projects
   The emphasis should be on things important to national
    energy and economic security
   It must be collaborative, not authoritarian
   It must recognize the needs of the entire community, the
    nation as a whole, and our obligations to each other, our
    global friends, and future generations
   Without significant changes, the promise of developing
    the environmentally friendly energy of the future and
    delivering it efficiently cannot be achieved

  A National Energy Policy…?

                  (Surely not…!)

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