Wall Street Journal
Latest Risk to Alaska Gas Pipeline:  More Gas

Saturday, January 30, 2010

As the Long-Discussed Energy Project Finally Advances, Discoveries of Fields Outisde the State Threaten Chances

January 30, 2010

The discovery of huge new natural-gas fields across the contiguous U.S. is threatening Alaska's plans for a pipeline to export gas to the lower 48 states.

Two rival consortiums, each backed by major energy companies, are competing to build the pipeline, designed to carry gas from Alaska's North Slope to continental markets.

But even as the project is poised to get off the ground after decades of discussion, its viability is being called into question as energy companies have found huge new supplies of natural gas locked in dense rocks known as shale in places such as Texas, Louisiana and Pennsylvania.

Those supplies are glutting the market and driving down prices, leading many experts to question whether a pipeline from Alaska is needed or could turn a profit for its backers.

Still, on Friday, one of the two contenders, backed by energy giant Exxon Mobil Corp. and pipeline company TransCanada, formally asked federal regulators for permission to begin accepting bids from gas producers for space on the pipeline, which would carry as much as 4.5 billion cubic feet of gas a day.

The rival project, a joint venture of oil and gas producers BP PLC and ConocoPhillips, plans this spring to announce details of its own plans and begin its own bidding process. The project would stretch as much as 2,000 miles from Alaska and would cost an estimated $30 billion.

Former Gov. Sarah Palin, who in 2008 signed a bill providing state support for the project, touted the pipeline during her vice presidential campaign as a potential solution to the nation's energy needs.

But that was before the success of shale drilling was widely recognized. The industry and many outside experts now believe the U.S. has a century's supply of gas.

"I just don't think that people appreciate even still the magnitude of gas volumes that are possible in the lower 48," said Porter Bennett, CEO of Bentek Energy, a consulting firm.

For a complete copy of this report from the Wall Street Journal, please click on the following link: http://www.wsj.com