Contributed by Bruce Walden
Our governor has signed on to a non-binding agreement (as I understand it) with the Chinese to build us a $45 billion (to $65 billion) gas pipeline. This means we’ll owe them that much at some point. Kinda reminds me of when our former governor indebted us to the Canadians for a half a billion for a pipeline of which not a single inch was ever laid.
Why build a pipeline? It is estimated that there are 45 trillion cubic feet of natural gas on the Slope. Right now it is selling for three or four bucks per thousand cubic feet, so let’s give it the benefit of the doubt, and say $4. It is at about 8,000 PSI (pounds per square inch), which can and should be used to push the much more lucrative oil out of the ground. And when that’s all gone, we can still sell the gas.
Now, let’s assume the governor’s dreams are realistic. We’re still in debt for $45 to $65 billion, and for what? Think about this: I grew up in Kokomo, Indiana and in the 1880s, they discovered that Kokomo was built over an ocean of natural gas. That gas just ran out about 10 years ago - after 130 years! But not one cubic inch of the stuff left Howard County by pipeline. It all left by train car.
A typical train car (for liquids) holds around 30,000 gallons. It takes around 83 cubic feet of natural gas to make a gallon of liquefied natural gas, so that one car would account for just under 2.5 million cubes of gas. This means that if you have a train with 50 such cars, you are moving about 125 million cubes per trainload once it is liquefied. Or for the governor’s goal of 200 million cubic feet per day, you’d basically have to move around 80 cars. If you used two smallish trains, you could do that without spending the $45 to 65 billion.
I could show you a lot of figures here, but space prevents me. However, you wind up spending a bit more than $600 million total to extend the track to the Slope, then on to Utqiaġvik. As in Alaska, everything costs more; you can figure a billion bucks to extend the Great Alaska. Once it is done, you would have a lot of folks, goods and services using that train. You’d have a “pipeline” to the Slope that would essentially be free, as it would at some point pay for itself and would continue to make money long after the gas and the oil are gone.
Then where do you sell the gas? You aren’t getting around West-Coast Gas to sell to the rest of the country. So you are bound to sell to Asia - assuming you can find buyers. And I do not like the notion of selling to the Communist Chinese who’ll eventually use it against us. Don’t fool yourself. That leaves a couple of towns in Japan and South Korea, such as Pohang.
If the gas can sell for a single dollar per thousand cubes, we would break even with the governor’s idea. With a railroad, we come out about $44 billion in the black. If the gas sells for the $4 it is at now, then we come out far, far ahead of that. So, the knee-jerk reaction would be, “Hey, if the gas sells that well, we might as well have the pipeline…” Again, why, when we can do better?
It was suggested that we ship the stuff, when the Arctic Coast is ice-free, to a holding station at an ice-free port on the Aleutians. However, how much shipping time do we really have? A train can run twelve months out of the year. Also, to liquefy natural gas, one needs to bring the temperature way, way down. That’s easier done on the northern edge of the state, rather than along our Gulf Coast. And the happy byproduct of that process is helium, which happens to be in short supply.
I’m all for selling our gas, and using it right here at home. However, I am opposed to the gas pipeline and I am vehemently opposed to selling the gas outside before it has helped us to deliver every single drop of oil to market.
The governor’s pipeline simply does not pencil out that well, and at its best, can never be as Alaskan-friendly as extending the rails northward. In fact, if that track could eventually be extended to the bush-hub cities, it would help those folks who are paying around $10 a gallon for milk in towns where there are no jobs.
More on those jobs in the not-so-distant future.