July 8, 2008 / 1:28 AM / in 10 years

Alaska governor announces in-state pipeline plan

ANCHORAGE, Alaska, July 7 (Reuters) - Alaska is joining forces with Enstar to build an in-state natural gas pipeline to send some of the state’s untapped reserves to its population centers, Gov. Sarah Palin announced on Monday.

The proposed line from the Alaska Natural Gas Development Authority and Enstar will run about 450 miles (724 km) from the Cook Inlet basin in southern Alaska north as far as Fairbanks, and later extend to the Brooks Range hills to bring gas from there south to Fairbanks, Anchorage and other Alaska markets.

The Republican governor told a news conference the project would seek to “deliver our natural gas to our homes and to our businesses as quickly as possible to finally unlock the energy potential throughout Alaska.”

Construction would start as early as 2011, with deliveries of 460 million cubic feet a day by 2013, she said.

The plan comes as state legislators consider whether to grant a license to TransCanada Corp (TRP.TO) for a pipeline to deliver North Slope gas reserves to the lower 48 U.S. states. TransCanada’s proposal is countered by a rival project planned by ConocoPhillips (COP.N) and BP Plc (BP.L) that would follow a similar route to an existing pipeline hub in Alberta.

That pipeline would tap into known North Slope reserves of 35 trillion cubic feet and deliver 4 billion cubic feet a day and cost $26 billion to $31 billion, according to estimates.

The in-state venture joins rival in-state gas pipeline projects.

Enstar has been studying a 690-mile line, estimated to cost $3.3 billion, to deliver North Slope gas to population centers. The Alaska authority, meanwhile, has been evaluating a separate 370-mile project that would be an offshoot of the massive pipeline built by either TransCanada or ConocoPhillips and BP.

Gene Dubay, senior vice president of Continental Energy Systems, Enstar’s parent company, said a partnership with the Alaska Natural Gas Development Authority (ANGDA) and the state would make an in-state line less costly and easier to build.

“We will definitely get the project done in the time that’s required,” he said at Palin’s news conference.

Still yet to be determined, however, are financial arrangements, sources of funding and sources of natural gas to feed the project.

The promise of a pipeline gives operators an incentive to explore for new sources of gas in Cook Inlet, an old basin where markets have been small and isolated, and in other undeveloped but potentially gas-rich basins, said Marty Rutherford, deputy Alaska commissioner of natural resources.

“We believe that there is probably a 50-year supply of gas down in the Cook Inlet,” she said.

Palin, who is pushing lawmakers to approve her plan to contribute up to $500 million to TransCanada’s project, said the state might contribute to this project as well, especially with its treasury swollen with oil revenues.

“I believe that the sense of the populace is if it takes a contribution from the state through ANGDA to get more affordable sources of energy to our businesses, to our homes, I think the sense is that is a positive thing, that is not a hardship for the state, especially in this time of surplus,” she said. (Editing by Braden Reddall)

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