Alaska Gov. Tony Knowles Proposes Legislation to Develop North Slope Natural Gas Reserves

Strategic Insights -

Alaska Governor Tony Knowles has proposed legislation to encourage the development of the state's vast natural gas reserves on the North Slope. The proposed legislation aims to create a cost-effective and competitive project that benefits both Alaskans and the producers. The bill is the result of efforts by state and industry officials through the Alaska North Slope Gas Commercialization Team, which recommended the construction of an 800-mile natural gas pipeline from Prudhoe Bay to near Valdez. The project, similar to the TransAlaska Gas System (TAGS), would convert about 2 Bcfd of North Slope gas into 14 million metric tons/year of LNG, with an estimated cost of around $15 billion.

Key Takeaways:

  • The proposed legislation aims to negotiate a tax structure that provides incentives for producers to develop North Slope gas reserves in a competitive world market.
  • The bill requires producers to hire Alaskans, use Alaska businesses, and provide gas for Alaska communities.
  • The Alaska North Slope Gas Commercialization Team's report recommends constructing an 800-mile natural gas pipeline from Prudhoe Bay to near Valdez.
  • The project is comparable to the TransAlaska Gas System (TAGS), which would convert about 2 Bcfd of North Slope gas into 14 million metric tons/year of LNG.
  • Estimated cost of the project is around $15 billion, with Alaska's North Slope containing an estimated 35 Tcf of largely undeveloped gas reserves.
  • Exxon Co. USA is the largest owner of North Slope gas reserves, followed by British Petroleum Co. plc and Atlantic Richfield Co.
  • The state, through its 12.5% royalty, has a significant financial stake in the development of the resources.
  • The proposed legislation authorizes the state to negotiate with the sponsors of the gas line project for payments in lieu of taxes and provides the option for municipalities to have an equity interest in the project.

Statistics:

  • Estimated 35 Tcf of largely undeveloped gas reserves in Alaska's North Slope.
  • Estimated $15 billion cost of the gas line project.
  • 2 Bcfd of North Slope gas would be converted into 14 million metric tons/year of LNG.
  • 800-mile natural gas pipeline from Prudhoe Bay to near Valdez.
  • The proposed legislation aims to create a progressive tax structure that shifts the tax burden from the beginning of a project to later years.
  • The bill requires Alaska communities to have access to the gas and describes terms regarding the employment of Alaska residents and Alaska businesses.

Sources:

  • [TOD, 1-12-98, p.1]