Dan Fauske is the president of the Alaska Gasline Development Corporation — or AGDC. He spoke to Sitka’s Chamber of Commerce on Wednesday about when and where Alaskans may see gas.

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AGDC president Dan Fauske says the construction of a gasline will create 8,000 direct jobs and be “the largest project in the country.” (KCAW photo/Robert Woolsey)

Earlier this year, Gov. Parnell announced that the state and TransCanada had called it quits, putting an end to AGIA.

Now, the Alaska Gasline Development Corporation is the only game in town. And Dan Fauske knows this game has been played time and time again.

“We have a plaque in our office. It says, Fairbanks to get Gas. It’s from the 1954 Daily News-Miner. So this debate’s been going on a while.”

The problem is economic. Natural gas is sold in volumes of 1,000 cubic feet at a price — right now — somewhere between $3 and $4. To sell gas, it has to be delivered in pressurized pipelines, or be super-cooled and liquefied.

If you’re close to the gas, it can be a great deal. The city of Anchorage has been served for decades by low-cost gas from oil refineries next door in Cook Inlet.

On the North Slope, where the state has vast reserves of natural gas, Fauske says it’s considered a byproduct.

“For years, the gas a Prudhoe Bay has been reinjected into the ground to force the oil out. The petroleum engineers will tell you that we’ve looked at this gas three and four times. They’ve recycled it.”

The AGDC is exploring a 700-mile gasline from Prudhoe Bay to Nikiski, which would be about one-hundred miles shorter than a gasline to Valdez, where the TransAlaska Oil Pipeline terminates. There are two options on the table. A 36 -inch low-pressure pipeline that would carry so-called “lean gas” — or gas ready for delivery directly to consumers. The other option is a 42-inch pipeline delivering much higher volumes of gas under much higher pressure. The smaller pipeline would cost almost $8-billion and serve primarily Alaskans. The larger pipeline would cost $65-billion, and supply Alaska and the global export market.

The big three oil producers — Exxon Mobil, ConocoPhillips, BP — and even TransCanada would partner with the state in the big pipeline, if it ever pencils out. Fauske says this is a big “if.”

“Oil companies are not charged with taking care of Alaskan citizens. Oil companies do things for their shareholders. I’m not defending them, I’m just saying no one’s going to invest in this kind of project so that 700,000 Alaskans can get a benefit. The reality is: They do things for their shareholders. The irony is that the Alaska Permanent Fund is a huge shareholder of Exxon stock. People say, They should have done this. It’s been looked at thirty times.”

The state invested $355 -million dollars in the Alaska Gasline Development Corporation to perform the preliminary engineering and design for the smaller gasline — called the Alaska Stand Alone Pipeline — which will take about 2 years. Fauske believes that sometime in that window, the two projects will meld and the state will ultimately have a 10-percent stake in a gasline that is operational by 2020.

Fauske spent 18 years as the director of the Alaska Housing Finance Corporation before taking over AGDC. He was on Gov. Palin’s AGIA team, which he says was a good idea, when gas was at $10. His expertise is in finance.

The discovery of shale gas in the northern plains of the US undermined AGIA, but Fauske believes this new gasline strategy, based on revenue bonds, is a workable solution for the state’s energy needs, as well as the largest construction project in the country.

But he says gas is nothing akin to the discovery of oil on the North Slope.

“Oil is king. Gas gives us security. From a revenue standpoint gas will never replace oil.”

Asked by a member of the chamber audience to give odds on which gasline would be built, Fauske pointed to the radio microphone and tv camera and declined. Instead, he quoted a line from the movie 2001: A Space Odyssey, and said, “Something wonderful’s going to happen.”

Gov. Sean Parnell talks about Southeast issues during the Southeast Conference’s Mid-Session Summit Jan. 12, 2014. He wants the gas line’s benefits to be shared with coastal communities. (Ed Schoenfeld/CoastAlaska News)

Gov. Sean Parnell wants to look for ways to get natural gas to Alaska’s coastal communities. He says a gas line and LNG plant could benefit more than Railbelt communities.

Parnell says all of Alaska will benefit from the pipeline, through jobs and increased state revenues.

But he also wants to figure out a way to get gas, or a byproduct, to Southeast cities, Yukon River villages and other towns near the water.

“The resource of that gas can be available to coastal communities, because it’s coming to tidewater. So, large volumes of gas to tidewater at Nikiski can move to other coastal communities,” he says.

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Parnell told a Wednesday meeting of the Southeast Conference, a regional economic advocacy group, that he has plans to study how that could work.

“I am creating through an administrative order, a roundtable or commission of people with coastal community experience and leadership to bring these issues to the fore of the gas line negotiations across the next 18 months,” he says.

He says he was interested in exploring propane, a byproduct of liquefying natural gas, as fuel that could be transported by barge or ship.

It’s not an unusual idea.

Jack Mussallem is mayor of Prince Rupert, a coastal British Columbia city with an expanding port facility.

“I have seen proposals where they actually float an LNG facility in and it’s contained on three to four 1,000-foot-long barges,” Mussallem says.

He says Ketchikan’s shipyard might bid on maintenance and repair of such vessels.

Doug Ward, who manages that facility for Vigor Alaska, says he’s also looked into the idea.

“In Norway, there’s a whole industry around small and midsize LNG projects. They have cryogenic barges or small LNG freighters all within the capacity we here in Southeast to build, operate or maintain,” Ward says.

A number of coastal communities are served by businesses that deliver propane for cooking and sometimes heating. But it’s a smaller amount than Parnell proposes.

A company called Alaska Intrastate Gas tried for more than a dozen years to develop a larger propane distribution system using Canadian gas. Efforts in Southeast never panned out.

But the governor remains optimistic.

“My vision for Alaska is that our river communities and the coastal communities that rely on fuel oil too would not have tanks of fuel oil to have to fill but would have propane tanks in the decades to come,” Parnell says.

He says gas could also be trucked to rural communities along the Interior road system. A similar plan is already being developed for Fairbanks.