The Alaskan Gas Rush

First it was gold. Then came oil.

Now Alaska is on its way to a third great boom. Oil companies--notably Atlantic Richfield, Exxon and Sohio--have already found immense reserves of natural gas under the frozen tundra of the North Slope. Geologists believe that there may be as much as 300 trillion cu. ft. of gas in deposits in Alaska's Arctic; those deposits could supply 5% of U.S. annual demand (currently 22 trillion cu. ft.) when tapped, thus helping to head off the long-predicted severe shortage in U.S. gas supplies. In fact, the gas could begin to flow from the Alaskan wells into the Lower 48 as early as 1980--if Washington could only decide on how it should be moved.

The problem is not technical or even economic. Now that average wellhead prices are above 50-c- per 1,000 cu. ft., the value of the new find is at least $500 million per trillion cu. ft. in Alaska, and perhaps three times that much delivered to the consumer. Thus money can be raised to transport North Slope gas. Indeed, two competing proposals--each of which would rank as among the very biggest private construction projects in history--have already been developed by competing energy companies.

One proposal, developed by the Alaskan subsidiary of the El Paso Co. of Texas, is aimed at keeping the gas under American control. The company would build an 809-mile-long pipeline from the North Slope to the Gulf of Alaska, closely paralleling the now half-completed trans-Alaska oil pipeline.

At the southern terminus at Gravina Point, the gas would be liquefied by lowering its temperature to --260DEG F. and shipped in special tankers to Point Conception, Calif., near Santa Barbara. There the fuel would be heated back to a gas, then pumped into existing pipelines for distribution throughout the Southwest. This arrangement would reduce the Southwest's dependence on natural gas from Texas, which could then flow in greater quantities to gas-pinched homes and factories in the Midwest and the East.

The second proposal, championed by Arctic Gas, a consortium of 19 American and Canadian pipeline, oil and utility companies, would bring the gas to U.S. markets entirely overland through 5,450 miles of lines from the North Slope through Canada. Although the $9 billion Arctic Gas plan would cost about $1.2 billion more than the El Paso system, it would also apparently be simpler to operate. Unlike the El Paso proposal, it would require no fleet of special-purpose tankers, no liquefication and deliquefication plants and no complex reshuffling of regional gas supply patterns.

Of course, the Arctic Gas proposal could theoretically put U.S.-bound gas under the control of a Canadian government that is increasingly inimical to U.S. business interests. The prospect does not worry Arctic Gas officials. They emphasize that Canadian firms, having found large deposits of natural gas in the Mackenzie River delta, would not only help to finance the pipeline but also use it to export surplus gas to the U.S. Adds William Brackett, the consortium's American vice chairman: "We've been shipping through the St. Lawrence Seaway for years without any friction between the nations. Besides, if Canada were to close the pipeline for some reason, the U.S. could retaliate easily. Almost all of western Canada's oil goes to eastern Canada through the U.S.; we could shut off their oil."

Political Decision. So far, neither proposal appears to have a clear edge over the other, though the Federal Power Commission is studying both schemes carefully before it grants one a transmission permit next December. Although El Paso's system would be slightly less expensive to build, it could use more energy in transportation and cost more to operate than Arctic Gas's scheme. Similarly, defense and environmental considerations roughly balance out for the two projects. In fact the critical question--whether to cross Canada --will probably be decided not by the FPC's impartial analysis but by politicians. Alaskan officials and some 44 labor unions are backing the El Paso plan which, as an All-American project they believe will provide more Alaskan and U.S. tax revenues and create more U.S. jobs. Congressmen from Eastern and Midwestern states favor the Arctic Gas proposal because it promises to guarantee their voters supplies of slightly cheaper gas. In the end, the choice will be made by the White House, which is likely to find the great gas decision a touchy one to make in a tense election year.

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