[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.
____________________