Ms. Palin's Pipeline

Monday, September 8, 2008

PEOPLE ARE still buzzing about Republican vice presidential nominee Sarah Palin's acceptance speech. But while her style has been minutely analyzed, very little commentary has focused on one of the few substantive claims she made about her brief tenure as governor of Alaska: that she "fought to bring about the largest private-sector infrastructure project in North American history . . . a nearly $40 billion natural gas pipeline to help lead America to energy independence." Is Ms. Palin right about the importance of the pipeline and her role in moving it forward?

Ms. Palin is indeed correct about the need to tap the 35 trillion cubic feet of natural gas under Alaska's North Slope, the same region whose oil made the state wealthy but which has begun to run dry. Natural gas demand is growing rapidly in North America, and low-carbon natural gas is better for the environment than coal or petroleum. This means that the outlook for gas prices is relatively bullish, making the economics of an Alaska pipeline more favorable than ever before. Yet for decades the idea has been deadlocked by federal and state politics -- and unless the United States can install a pipeline to transport Alaska's gas soon, companies may commit to foreign sources of liquefied natural gas, thus locking in long-term dependency on imports.

Congress passed legislation to expedite a pipeline in 2004. Ms. Palin's predecessor as governor, Republican Frank H. Murkowski, attempted to negotiate a deal with the three oil companies that control the North Slope gas, Exxon Mobil, BP and Conoco Phillips. His plan would have awarded the companies a long-term tax freeze in return for relatively weak commitments to actually build the pipeline. But even though Vice President Cheney and Sen. Ted Stevens (R-Alaska) lobbied hard for Mr. Murkowski's approach, Alaska's public and legislature balked, viewing the proposal as stacked in favor of the Big Three oil companies. Ms. Palin rode criticism of Mr. Murkowski's deal to victory over him in the 2006 Republican gubernatorial primary and then to the governor's office later that year. She reversed Mr. Murkowski's strategy, asking the legislature to pass a law setting criteria for a deal, then throwing the project open to companies other than the Big Three. The result was a commitment by an experienced pipeline company, TransCanada, to build the project, which may take 10 years, in return for $500 million in state seed money derived from Alaska's recent oil windfall.

The oil companies still control the gas. So, if TransCanada actually gets all the necessary permits, assembles financing and builds the pipeline, the Big Three will have to be persuaded, years from now, to ship their gas through it on reasonable terms. Meanwhile, BP and Conoco Phillips have announced plans to build a pipeline of their own without the state's backing -- a sign that the political and economic wrangling over this immense and risky project is far from over. But it is also a sign that Ms. Palin's outflanking of the oil companies injected some competition and urgency into a process that was previously stalled. Perhaps her Democratic opponent for the governorship in 2006, who campaigned on similar ideas, would have achieved these results. Nevertheless, Ms. Palin actually did.

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