By Zack Colman - 10/04/12 04:53 PM EDT
Three energy producers agreed on a plan Wednesday for a pipeline that would send Alaskan natural gas originally intended for the Lower 48 states to Japan and South Korea.
The plan is for the pipeline to bring Alaska’s North Slope natural gas reserves to a port in the state's southern coast. It would then be liquefied for tanker travel so it could be exported to Asia.
The project puts the administration’s role in exporting natural gas back in focus, as it would need to approve pacts with South Korea and Japan.
The administration sets a higher threshold for deals with countries that lack a free-trade agreement with the United States, such as Japan. So far, the administration has approved one non-free-trade agreement export, with 12 others still under review.
The federal government set aside loan guarantees for pipeline construction when the North Slope’s natural gas was destined for the Midwest. But the flush of domestic natural gas reduced the need for that pipeline, in turn locking the North Slope’s reserves in Alaska.
Now, Alaskans and their congressional delegation see the pipeline to Asia as the state’s best bet for making use of their reserves.
“No other single project is as important to Alaska’s economic future as a gas line, so it’s critical that the state and the producers move quickly to take advantage of the potentially limited window of opportunity to sell gas into the Asian market,” Sen. Lisa Murkowski (R-Alaska) said in a Thursday statement.
After years of silence, the Energy Department has seen an influx of natural gas export applications. Noting the trend, an Energy official told the Senate Committee on Energy and Natural Resources in November 2011 that the department must recognize that the “cumulative impact” of such exports “could pose a threat to the public interest.”
And a federal law specific to North Slope exports requires the president to determine that “such exports will not diminish the total quantity or quality nor increase the total price of energy available to the United States.”
Robert Dillon, Republican spokesman for the Senate Committee on Energy and Natural Resources, said the North Slope’s reserves are cut off from the Lower 48 states, so exporting it would have not affect prices there. He said natural gas export agreements are supposed to be judged by their effects on local conditions.
Dillon also said the glut of natural gas in the Lower 48 has “changed the paradigm” there, making exporting North Slope gas more feasible.
“There may be some squawking,” Dillon said. “But we believe exports are good for the economy ... and Alaska gas is stranded.”
The energy companies still have many hurdles to overcome before they file an export application with the Energy Department.
They still hope Alaska will reduce tax rates on natural gas production — which is taxed at the same level as oil — before proceeding with the financing stage.
It also is unclear whether project backers will ask for public funding, despite the cost of the effort more than doubling since it was initially proposed, Dillon said.
— This story was updated at 2:45 p.m.