In-state Alaska natgas line to cost up to $11 bln

ANCHORAGE, Alaska Mon Aug 9, 2010 8:15pm EDT

ANCHORAGE, Alaska Aug 9 (Reuters) - A pipeline bringing natural gas from Alaska's North Slope to the populated region in the southern part of the state would cost $5.7 billion to $11.8 billion to build and would likely require state subsidies or at least partial state ownership, members of a task force told state legislators on Monday.

The "Alaska Stand Alone Pipeline Project" would comprise a 737-mile (1,186-km), 24-inch (61 cm) diameter pipeline delivering up to 500 million cubic feet of natural gas from Prudhoe Bay to the Anchorage region.

Lawmakers established the task force to study the feasibility of such an in-state project as a backup to the long-desired natural gas export pipeline that would deliver 4.5 billion cubic feet a day from Prudhoe Bay on the North Slope to major North American markets.

The major export line has been proposed for three decades, since before the Prudhoe Bay field began pumping oil in 1977. Currently, two groups are proposing to build and operate major export pipelines, and are competing for customer commitments and government licenses.

TransCanada Corp (TRP.TO) and Exxon Mobil Corp (XOM.N) are proposing a 1,700-mile (2,736 kilometer) pipeline from the North Slope to Alberta that would cost $32 billion to $41 billion to build. A joint venture formed by BP (BP.L) and ConocoPhillips (COP.N), called Denali, proposes a similar pipeline that the companies say would cost $35 billion to build.

Even if one of those competing groups is successful in building a huge export line and starting operations in 2020, as they envision, Alaska's population centers will likely need new natural gas supplies before then, Dan Fauske, chairman of the team studying in-state pipeline options, told lawmakers at a hearing in Anchorage Monday.

"The big pipeline is everyone's goal. But it's 10 years away," he said.

With the construction cost so high and the market relatively small and isolated, it is likely that the state government would have to pay for at least part of the project, Fauske said.

"I have a view that there will need to be some kind of equity (investment) or subsidy for construction," Fauske said.

The in-state pipeline team is trying to entice potential industrial users to make a pipeline more economically feasible, he said. "We are open to all ideas and are exploring as many as is fiscally possible," he said.

(Reporting by Yereth Rosen; Editing by Bill Rigby, Phil Berlowitz)

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