Could cap-and-trade sink the gasline?
| Dec 7, 2009Pending federal legislation restricting carbon dioxide could hurt a natural gas pipeline project designed to deliver fuel that could help wean the nation off higher-emission coal.
Joe Balash, a special assistant to Gov. Sean Parnell, said the current bill before Congressional committees would add to the costs of a large-diameter natural gas pipeline, proposed by two different groups to run from the North Slope to the North American pipeline infrastructure in Alberta, Canada. Under one scenario, the cap-and-trade legislation could sink the project pegged as the only way to fuel Alaska's state treasury as oil production falls off.
Balash spoke before a group of lawyers at Law Seminars International's Energy in Alaska conference Monday in Anchorage.
The federal bill, which has passed the House of Representatives and is now being debated in the Senate, would put a price -- and a limit -- on carbon dioxide emissions. Companies emitting more than their share could buy credits from others.
The compressor stations that would push gas through the massive proposed pipeline would exceed carbon limits, Balash said. That alone wouldn't kill the project, but would add an estimated 15 cents per million British thermal units, upping the toll charged for moving gas. It's a cost consumers would likely pay.
"The toll will go up; it will become marginally more expensive to move gas," Balash said. "If that occurs, you add another layer of risk and challenge to the economics of the pipeline. Now that's the good news."
The legislation on the table isn't clear about whether North Slope producers will be exempt from the limits for carbon dioxide removed from the Prudhoe Bay gas streams before the resource is fed into the pipe. If they are not, the cost of the gas could ratchet up an estimated $14 per million Btu, according to an analysis prepared by the state's Natural Resources and Revenue departments. Balash said the federal language is unclear and represents a worst-case scenario based on federal projections of how much carbon offsets may cost.
"That is something that, frankly, is going to push the project under water," Balash acknowledged. "If those offsets (for domestic producers) are necessary, the cost for production of the gas will become uneconomic."
Prudhoe Bay's gas contains about 12 percent carbon dioxide that must be removed, substantially more than is found in gas in Cook Inlet and other locations. Much of the carbon dioxide extracted from the North Slope gas would probably be reinjected into reservoirs to boost recovery of more oil and gas.
Yet the pipeline and its gas have the potential to offer America more of a cleaner energy supply. The project is so huge that if only half of the gas were to be used for power generation, it could offset 120 to 190 coal-fired power plants, Balash said, citing a state report.
"You could meet many of the (Obama) administration's goals for reducing greenhouse gas emissions," he said.
The governor and his staff are watching closely as Congress moves toward the new regulations. Parnell submitted written testimony to several Congressional committees detailing the potential impacts not only to a natural gas pipeline, but also to other Alaska issues, which in turn could become national issues.
The administration isn't disputing the need for climate change legislation, Balash said. But Congress should avoid broad policy statements that choke out regional differences and should offer incentives to states instead of creating mandates that states will have to fund on their own.
Parnell also made the case for increased research into the Arctic, where climate changes are often first identified.
"We're the canary in the coal mine," Balash said. "We're feeling the effects first; we're going to feel them the most. It is, we think, important that Congress understand that. For a piece of legislation that is hundreds of pages long, the word ‘Arctic' is mentioned one time."
The governor's office is also concerned with how the pending federal rules will impact pressing in-state issues.
Alaska is faced with major decisions about where energy will come from and how it will reach consumers. A recent study of the Railbelt's electric needs indicates at least $10 billion will be needed to build the generation and transmission infrastructure necessary to take Alaska through the next 50 years.
Decisions have to be made, and soon, as utilities' existing infrastructure nears the end of its life span and natural gas supplies in Cook Inlet remain uncertain at peak times. Balash said the choices are among projects with long lead times and hefty price tags, and Alaska needs to understand, soon, what federal rules may apply to energy production.
Contact Rena Delbridge at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
Instead of addressing the critical issues that make or break a gasline they study everything else so they do not have to come to grips with the fact that there is not going to be a gasline, any gasline while they studiers then continue to pocket the study money.
For those that do not understand the game is played -- The studiers give a portion of their state study funding back to the legislators as campaign contributions.
The gasline, any gasline bullet gasline or otherwise, just like the Knik Arm Bridge violates McCutcheon’s Third Law of Studies – “If ‘it’ doesn’t sense on the back of an envelope no amount of study money can study ‘it’ in to being”.
This is the same thing they are doing with Chakachamna to keep it alive while not coming to grips with the fact that Chakachamna is on the Castle Mountain earthquake fault and Chakachamna hydro would destroy the fish in two rivers and two lakes. Rep. Harry Crawford foisted Chakachamna on Alaskans as courtesy to the Cook Inlet oil companies in order to add confusion to Cook Inlet energy situation. The more the confusion the more Conoco/Marathon/ Chevron/ Enstar profit.
As for Cap and Trade, another wondrous greene idea which has now been proven it does not function the way the greenies said it would. Cap & Trade is so bad that it worse than nothing. The greenies rather than disavow cap and trade and opposite cap & trade, just walked and left it like they did with turning food into fuel, ethanol in case you have forgotten.
When are you greenies going to stand up admitting that turning food in to fuel was one of the world’s stupidest ideas and kill it
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Despite this, (and despite Parnell's apparent request that the President prioritize Parnell over one of our troops' families) Parnell almost certainly would have had a minute or two to talk with the President. If Parnell had been prepared, he could have briefly summarized his concerns about the issue above, as well as his request for a Yukon fisheries disaster declaration.
Instead, Parnell chose to go hang out with contractors across town. I hear contractors may be among his strongest supporters. (I look forward to learning from APOC how much our governor may have profited, from contractor campaign contributions, as a consequence of his decision to snub the President of the United States and meet with his contractor campaign donors instead).
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Got Ya! Got Ya! Got Ya! Rena & Alaska Dispatch. If reinjecting the removed Carbon dioxide back into Prudhoe Bay will “ boost recovery of more oil and gas” then not removing the rest of gas stream will and reinjection and recycling all of the gas stream will boost oil covery even more!
Parnell’s gasline team screwed up when they admitted that fundamental precept of oil production. What part of the above Commissioner Tom Irwin don’t you understand?
It is not new, that EOR has been around for more than hundred years. It is just that that all of the gasline advocates, listen up Gara, have been in denial. Remember oil is where is money is not gas. If there is to be gasline, any gasline, that gasline will require massive subsidies and additional only come at the expense of lost oil recovery, billions of barrels oil and gas liquids thus hundreds billions of dollars.