The never-ending gas line debate: now or never: don't wait until it's too expensive to build.

• Author: Bradner, Mike
• Position: OIL & GAS

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Will there ever be a natural gas pipeline built to the North Slope? After almost four decades of talk about gas pipelines, Alaskans are right to seriously question whether the giant project will ever get done. That seems all the more so now with a rapid escalation of steel and labor costs, which are the most critical components for 1,500 to 3,000 miles of new pipeline.

There also is the uncertainty over future gas prices in the Lower 48. Gas prices are expected to be higher when the project could be finally in operation, about 2018 to 2020 by most estimates, but will they be high enough to pay for the $30 billion to $40 billion the pipeline is expected to cost?

If those aren't worrisome enough, there's the political quagmire in Alaska over the project, with a disagreement between Gov. Sarah Palin and North Slope gas owners, who must pay for the project through transportation fees for their gas, over the best way to proceed to get the pipeline built. It's anyone's guess where steel and labor rates will be when and if the pipeline is built, but one would think the political situation in Alaska should at least be manageable.

State legislators are wrestling with these questions as they consider competing proposals by TransCanada Corp. and ConocoPhillips Alaska Inc. to develop a project. TransCanada has applied under Gov. Sarah Palin's Alaska Gasline Inducement Act, a state law that provides a $500 million state grant and other exclusive rights to a project that meets certain state requirements. ConocoPhillips has put forth its own plan outside the state's AGIA process, arguing that it doesn't need a $500 million grant from the state.

Of the three major risks for the project--costs, market prices and taxes in Alaska--the state tax regime is one risk element that can be reduced. This is the motivation for ConocoPhillips, with its pipeline proposal, to ask the state for a contract to fix gas production taxes for a period of years. The governor suggested something similar, in fact, when she introduced her plan for a pipeline, through the Alaska Gasline Inducement Act in early 2007. The difference between Palin's proposal and ConocoPhillips' proposal on a tax deal is mainly that the governor wants to have the tax terms applied to gas shipped through an independently owned pipeline licensed under her AGIA plan, while ConocoPhillips wants tax terms for its project that would not be done under AGIA.

WHY AGIA?

This may seem like nit-picking to the casual observer but there is a lot that is...