[Congressional Record Volume 150, Number 26 (Wednesday, March 3, 2004)]
[Senate]
[Pages S2021-S2023]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              ALASKA GAS PIPELINE--NO LONGER A PIPE DREAM

  Ms. MURKOWSKI. I thank the Chair.
  Mr. President, we will soon begin debating the merits of the tax bill 
that will bring the United States into compliance with our World Trade 
Organization's obligations and assist domestic manufacturers. I 
understand this bill has been renamed the Jumpstart JOBS Act, referring 
to the number of manufacturing jobs that have been lost in the past few 
years, whether it is from businesses relocating their plants overseas, 
the outsourcing of jobs, or increased efficiency that does not require 
as much manual labor.
  I believe that every Senator in this body wants to help those 
Americans who have been laid off to find new employment and to provide 
assistance to our domestic manufacturers that will lead to real job 
creation. But when we talk about job creation, too often this body 
overlooks a project that would produce those jobs for Americans, that 
would create jobs in all 50 States, and not just a few jobs but by at 
least one estimate we would create over 1 million jobs across the 
country.
  Certainly, the number of jobs nationwide will at a minimum--at a 
minimum--be in the thousands, and that project I am speaking of is the 
construction of a natural gas pipeline from Alaska to the lower 48.
  With the reality in mind that this project will lead to real job 
creation, I would like to speak to the body this morning about three 
very exciting announcements relating to the Alaska natural gas 
pipeline.
  Three consortiums have filed applications to build a gas pipeline 
from Alaska's North Slope. These proposals would transport the 35 
trillion cubic feet of known technically recoverable reserves to the 
starved markets in the lower 48. This would happen at a rate of roughly 
4.5 billion cubic feet per day. Many believe there is upwards of 100 
trillion cubic feet of natural gas on the North Slope and quite 
possibly more than that.

  The first announcement from MidAmerican Energy Holdings Company, a 
major U.S. pipeline company and a subsidiary of Berkshire Hathaway 
whose chief investor is financier Warren Buffett. Partnering with 
MidAmerican will be Cook Inlet Regional Corporation and Pacific Star 
Energy, which is a consortium of Alaska Native corporations.
  This is great news for Alaska, and it is great news for America. 
Individual Alaskans, Alaska Native corporations, and Alaska-owned 
corporations will have ownership opportunities in the pipeline under 
this proposal--this is good for Alaska's economy--and oversight of the 
main transportation project that will be used to move Alaska's commonly 
owned resources to market.
  Rather than just benefit from the jobs and influx of short-term 
construction spending, as we saw during the construction of the Trans-
Alaska pipeline, this represents a significant long-term benefit to 
individual Alaskans and their families.

[[Page S2022]]

  Following MidAmerican's application, the three major producing 
companies in Alaska--ConocoPhillips, BP Exploration, and ExxonMobile--
also filed an application with the State. These three companies hold 
the lion's share of the right to produce North Slope natural gas.
  Late last week, a third group, which is the Alaska Gasline Port 
Authority, filed another application to build a pipeline. This third 
option proposes a liquefied natural gas project that would take natural 
gas from the North Slope, liquefy it at tidewater in south central 
Alaska for transport to the west coast markets in the lower 48.
  In the end, the project that best meets the needs of Alaska and the 
markets will get built, but too often in our discussions we overlook 
the proposed LNG project in favor of the land route that goes through 
Canada. Two years ago, Alaska voters indicated their desire for 
construction of an LNG project, but we have to make sure the numbers 
make sense and the proposal is good for the State of Alaska.
  I inserted language in the omnibus appropriations bill that provides 
the opportunity for the loan guarantees included in the Energy bill to 
be available for the LNG project option; that is, if the Secretary of 
Energy determines that it is the best project for purposes of this 
provision. It is something that needs to be proven by the project 
sponsors. Again, it demonstrates the need for passage of the Energy 
bill.
  In the meantime, we have three applicants that are vying to build a 
gas pipeline along the Alaska-Canadian highway, with a possible spur to 
south central Alaska for an LNG project. They have come forward, put 
their names on paper, and they are willing to begin negotiations with 
the State. For all of these reasons, Alaskans are excited.
  I need to back up and clarify. When the initial announcements were 
made about filing the applications, both MidAmerican and the producers 
stressed the need to enact the regulatory streamlining, the judicial 
streamlining, and the fiscal incentives that are currently contained in 
the Energy bill for the construction of a natural gas pipeline to go 
forward. There should be no misunderstanding about this; the provisions 
in the Energy bill relating to these issues must be enacted into law if 
we hope to see positive movement on this project.

  These filings we have in place now in the State are not a guarantee 
that the project will be built. These applications represent the 
beginning of a dialog between the applicants and the State of Alaska, 
but no one should interpret these events to mean that we do not need to 
pass the Energy bill.
  A cornerstone of our national energy policy is the production of 
Alaskan gas and delivery of the needed resources to markets in the 
lower 48. Members on both sides of the aisle recognize the benefit that 
Alaska gas means for America.
  We have seen the volatility in the natural gas prices that had 
significant negative impacts on businesses and on families struggling 
to make ends meet and to keep their homes warm in the winter. The 
Alaska natural gas pipeline will bring welcome stability and a measure 
of predictability to the natural gas marketplace, as well as benefit 
consumers across the United States.
  A couple of weeks ago, I had an opportunity to read an article by a 
gentleman by the name of Douglas Reynolds, an associate professor of 
oil and energy economics at the University of Alaska Fairbanks. Mr. 
President, you have read his book, I know, and have had good things to 
say about what he has written in the past. I have a copy of the 
article.
  I ask unanimous consent that the article be printed in the Record 
immediately following my remarks.
  The PRESIDENT pro tempore. Without objection, it is so ordered.
  (See exhibit 1.)
  Ms. MURKOWSKI. Mr. President, Mr. Reynolds brought out the point, 
which I would like to emphasize, that providing the financial 
incentives for a natural gas pipeline is ``like a futures contract to 
insure a more reliable natural gas supply source.''
  Then he went on to say:

       Congress has the option to assure a future supply of Alaska 
     gas at a reasonable price, and to get that supply on line 
     sooner than markets alone will do it.

  The effect would be to make Alaska's gas supply less reliant on NLG 
exporters with less chance for market manipulation.
  To me, this just hits it right on the head. Consumers are facing 
increasing prices of natural gas. We have the opportunity to access a 
reliable supply of energy that will be produced under some of the most 
stringent environmental standards in the world and we can do it now, 
before we become dependent on foreign sources.
  Douglas Reynolds and I are not the only ones who agree with this 
viewpoint. Recognizing the United States need for natural gas, the 
Federal Reserve Board Chairman Alan Greenspan testified before the 
Congress last year that natural gas supplies represent a ``serious 
problem'' to the national economy.
  He noted U.S. policy with respect to natural gas is contradictory as 
we encourage consumption more than production. The chairman of the 
Energy and Natural Resources Committee, Senator Domenici, has worked 
diligently for more than a year to craft a bill that promotes many 
forms of renewable energy, encourages energy efficiency in the Federal 
Government and consumer products, increases the authorization of the 
low-income home energy assistance program, and moves us closer to 
construction of the Alaska natural gas pipeline.
  To allay the major concerns of Members that led to the filibuster on 
the conference report on H.R. 6, the Senator from New Mexico has 
introduced a new Energy bill that has significantly less impact on the 
Federal budget. The new Energy bill streamlines the permitting process 
for the Alaska natural gas pipeline, expedites judicial review and 
provides for Federal loan guarantees and accelerated depreciation to 
lessen the cost of financing the project.
  To those of my colleagues in the Senate who want to see this project 
built, who want to stop the rise of natural gas prices, who want to 
ensure a reliable supply of natural gas, who want to create hundreds of 
thousands of jobs across the country, I say pass this new Energy bill.
  The fiscal and regulatory provisions in the Energy bill are a 
prerequisite to the construction of this project. The longer we wait, 
the longer we allow this important policy to remain caught in 
congressional gridlock, the more our economy is going to suffer. 
Senators should not accept the status quo when it comes to energy 
production. We should instead work to pass this Energy bill so we can 
tell the American people help is on the way, so we can begin to 
rationalize the energy markets, and so we can work to become less 
dependent on foreign sources of energy.
  The Alaska natural gas pipeline will be the largest construction 
project of its kind ever completed. I believe the Federal Government 
should play a role in reducing the risk involved with this project, 
just as the Federal Government played a role in bringing affordable 
electricity to the South and to the Pacific Northwest.
  The PRESIDING OFFICER (Mr. Graham of South Carolina). The Senator's 
time has expired.
  Ms. MURKOWSKI. The provisions in the Energy bill fulfill the Federal 
Government's role in bringing this pipeline to fruition.
  I yield the floor.

                               Exhibit 1

          [From the Fairbanks Daily News-Miner, Feb. 22, 2004]

            Gas Line Will Happen, But Alaska Must Negotiate

                         (By Douglas Reynolds)

       During winter break in the Lower 48, I heard over and over 
     again concerns about the price of natural gas. It is 
     currently about $7 per thousand cubic feet, when only a few 
     months ago it was $4. Some fear there is market manipulation 
     since stocks of gas in reserve are adequate and the winter 
     has not been colder than normal so far. Investigations have 
     already started.
       However, there is a reason behind the price rise. While 
     this year there may be adequate supplies of natural gas, next 
     year may be a different story. As I explain in my book, Lower 
     48 and Southern Canadian natural gas production will decline 
     and the United States will face a supply gap with prices 
     climbing above $10.
       However, supply is declining faster than I anticipated. The 
     market may merely be anticipating next year's supply gap--
     increasing prices now to conserve reserves and to increase 
     production later.

[[Page S2023]]

       Of course it is theoretically possible to have market 
     manipulation. But this is extremely difficult to do and only 
     works if the supply system is uncompetitive. The internal 
     North American market is not.
       Interestingly enough, if people in the Lower 48 are upset 
     now about alleged manipulation of the natural gas market, 
     they sure won't be happy when the United States starts 
     depending more heavily on imported liquefied natural gas. 
     This is because with imported LNG, the LNG exporters 
     themselves will be able to manipulate natural gas prices and 
     do it with impunity. It will be like OPEC all over again.
       There is a mechanism to reduce LNG exporter's ability to 
     manipulate the gas market. It is to get Alaska natural gas to 
     market more quickly. Congress still has a chance to change 
     the Energy Bill by putting back in the natural gas credit 
     provisions. I know such a move is highly unlikely, but it is 
     certainly something each Alaskan should be clambering for.
       Interestingly enough, some experts would actually like to 
     put in tax credits for Lower 48 gas producers rather than for 
     Alaska gas even though Lower 48 producers are making money 
     hand over foot. If more gas existed in the Lower 48, the 
     current incentives would already be pushing supplies 
     higher.
       The fact of the matter is, the Alaska pipeline tax credits 
     that were cut from the energy bill are like a futures 
     contract to insure a more reliable natural gas supply source.
       In other words, Congress has the option to assure a future 
     supply of Alaska gas at a reasonable price, and to get that 
     supply on line sooner than markets alone will do it. The 
     effect would be to make America's gas supply less reliant on 
     LNG exporters with less chance for market manipulation.
       Since consumers are already complaining over high natural 
     gas prices, I would think that having such tax credits and a 
     more reliable source of natural gas would be to America's 
     advantage. As it stands, American consumers will undoubtedly 
     begin to complain ever louder when it's apparent that Alaska 
     gas is stuck on the North Slope just waiting for the time 
     when prices reach outrageous levels before reserves are 
     finally developed.
       Needless to say, our Alaska congressional delegation has 
     fought hard to help make the gas line a reality, but now it 
     is up to the state to take the initiative.
       So will the gas line happen? Yes. But Alaska may have to 
     negotiate with the producers or other pipeline companies to 
     get a deal. I believe the best strategy for the state is to 
     give a progressive royalty and severance tax package for all 
     natural gas production.
       That means a low royalty and tax percent during low prices 
     and a high royalty and tax percent during high prices. This 
     will give Alaska much more revenue than the current royalty 
     and severance tax system would give because of anticipated 
     high prices. It will also quicken the pace of developing a 
     pipeline. It does however imply more risk in Alaska's 
     revenues over the years.
       The future price of natural gas will not be lower than $4 
     on the East Coast and will easily stay in the $6 to $10 
     range.
       This is because Atlantic Basin LNG producers will be slow 
     to ramp up production even while Lower 48 production goes 
     into decline. Plus LNG exporters can manipulate market prices 
     exactly the way domestic suppliers have been accused of 
     doing. Alaska can take advantage of this and negotiate to get 
     a line done quickly and with greater profits.
  The PRESIDING OFFICER. The Senator from Connecticut is recognized for 
10 minutes.

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