By Dick Kauffman
May 18, 2006
Dr. Logsdon graduated from Palmer High School in 1967 and from Washington State University in 1980 with a PhD. in Agricultural Economics. Dr. Logsdon was employed by the State of Alaska for twenty-five years and retired from his position as Alaska's chief petroleum economist in November of 2004. He has been working since July 2005 with the Governor's office as an advisor for the gas pipeline negotiations.
Speaking at the Ketchikan Greater Chamber of Commerce luncheon Wednesday, Logsdon presented a brief overview of the proposed gas pipeline contract and its importance to Alaskans.
Logsdon said the construction costs of the Alaska gas pipeline, which has been in discussion for three decades, will make the Alaska pipeline one of the largest projects going on in the world that is privately financed and will require a huge capital investment.
The pipeline will take 5.3 million pounds of steel and will run from Prudhoe Bay to Fairbanks said Logsdon. The pipeline will then follow the Alaska Highway to Delta Junction then on to Tok. The pipeline will cross the border to Alberta, Canada. Dr. Logsdon said along the route there would be preplanned off-take points where the sponsors of the project will be required by the proposed contract to engineer and construct off-take capabilities at four different places along the mainline. These off-take points have been identified as Fairbanks, the Delta Junction area, the Yukon River area, and at one other yet to be identified point to provide for a spur line to Southcentral Alaska.
"Why build the pipeline now?" Dr. Logsdon said there are things now in place that are going to facilitate the construction of the pipeline. First, natural gas prices are very high and the demand for gas is high in the lower forty-eight. "Secondly, from our own perspective our oil production is in decline and as you know, oil has been paying the bills up here. Eighty to ninety percent of the state's money comes from oil," said Logsdon. With that resource on the downslide we're going to need something to replace it he said. "Well, I'm here to tell you that massive reserve of gases up on the North Slope represent our next Prudhoe Bay."
One of the crucial elements that has been negotiated in the proposed contract is the state's direct participation in the gas pipeline project said Logsdon. This was made possible by an act called the Stranded Gas Development Act that was put in place to enable the administration to negotiate a fiscal contract with the producers. He said Alaska's gas has been stranded up on the North Slope for around thirty years and it was felt that if the state could sit down and negotiate a deal, Alaska could get a pipeline project going. Logsdon said the key feature of the deal that is negotiated right now is that Governor Murkowski made the decision that he wanted a business type deal, a commercial deal which means that we sat down with the lessees, the people who purchased the leases, which contained Prudhoe Bay, Point Thompson gas reserves and negotiated a fiscal contract that would improve the economics to the producers to make this project more competitive at the same time ensuring that all the Governor's six principles were met. Those six principles are a fair share of revenue, state equity ownership in the pipeline, jobs for Alaskans, access to the gas for Alaskans and new explorers, and an expandable pipeline.
Dr. Logsdon said the key is the concept of the state's participation. First of all, the state will own some of the gas. Logsdon said, "In fact, instead of taking our gas royalties and production taxes in value, we're going to take the gas and have the responsibility for selling that ourselves." He said Alaska would get roughly twenty percent of the gas that's produced at Prudhoe Bay. "Secondly, the state is going to be an owner by taking a twenty percent piece of the action in the project itself." Logsdon said, "So, we'll be a pipeline owner." This implies two things he said. "One is, we're going to be a gas shipper. We're going to have to get our gas to market." Not only will we be a gas shipper and a gas line owner, we'll be a marketer said Logsdon.
Also in the proposed pipeline contract there will be access for new explorers to look for gas, as they will now have the opportunity to ship their gas down the pipeline to market. As an added benefit, Logsdon said when you punch a bunch of holes looking for gas the chances are you're probably going to find oil. The pipeline will also be expandable.
Logsdon said the state estimates up to 9,300 direct and indirect jobs will be created with the construction of the gas pipeline. The challenge will be to train enough Alaskans for those jobs. That training effort has already begun with the state and federal government already committing $39 million for job training, to ensure that a qualified pool of Alaska workers is available. To ensure Alaska hire, the proposed contract and current state law require the producers and their contractors advertise in Alaska for all available employment and business service opportunities and the proposed contract requires the producers to spend $5 million for workforce training programs.
Dr. Logsdon said the estimated state gas income over 30 years could range from $26.5 billion with gas priced at $2.50 to $129 billion with gas priced at $8.50.
Logsdon said what the pipeline means for Alaska are a lot more jobs and a lot more revenue coming into the state treasury.
Before the proposed gas pipeline contract is approved by the Legislature and sent to the Governor for his signature, there is a public process to go through. Currently we are in the 45 day public comment stage said Logsdon. Following the public review process, the contract will go to the Legislature for ratification.
The first of these statewide public hearings will commence in Ketchikan on Friday at the Ted Ferry Civic Center. There will be presentations and an opportunity for public comment.
Dr. Logsdon said, " I encourage everybody to let your thoughts be known about the pipeline."
Schedule for the public hearings:
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