Palin and the Maybe Pipeline
"We're building a nearly $40 billion natural gas pipeline -- which is North America's largest and most expensive infrastructure project ever -- to flow those sources of energy into hungry markets."
--Sarah Palin, Vice Presidential Debate, October 2, 2008
"That pipeline will be a lifeline -- freeing us from debt, dependence, and the influence of foreign powers that do not have our interests at heart."
--Sarah Palin, Toledo, Ohio, October 29, 2008
In a major speech Wednesday on how to achieve energy independence, Sarah Palin drew attention once again to a huge natural gas pipeline project that will connect Alaska with the Lower 48. The pipeline has been under discussion for more than three decades -- but work has not yet begun and there is still no guarantee that it will ever be built. So what exactly has been accomplished during the two years Palin has served as governor of Alaska?
Palin persuaded the Alaska legislature to authorize a Canadian company to secure the necessary financing and permits for a 1,715 mile pipeline from the North Slope gas fields to the Canadian pipeline network. Under the deal, which received final approval in August, the state will provide up to $500 million to Calgary-based TransCanada Corp to coordinate the securing of permits, customers, and financing for the pipeline. TransCanada would like to complete construction on a pipeline by 2018.
By granting the license to a Canadian company, Palin was attempting to perform an end-run around the companies that actually control the 35 trillion cubic feet of gas reserves on the North Slope: BP, Conoco and Exxon Mobil. She complained that the big oil companies were demanding too high a price for their participation in the pipeline project, and that her plan will expose them to "free-market competition."
The problem with this narrative, says University of Alaska Economics professor Douglas Reynolds, is that the pipeline cannot be built without the cooperation of the companies who control the North Slope oil. These companies can refuse to sign off on the pipeline construction project coordinated by TransCanada and remain free to organize their own alternative project. Financing for either project will almost certainly depend on some kind of barter agreement between Alaska and the big oil producers.
Contrary to claims by Palin and her supporters, the latest developments do not guarantee that the pipeline will actually be built. The Anchorage Daily News called those claims "incorrect" in its coverage of the
August 2 Senate vote approving the granting of the license to TransCanada.
It is therefore inaccurate for John McCain to claim, as he has done at various times on the campaign trail, that his running mate "negotiated a $40 billion natural gas pipeline that will bring clean energy to the Lower 48." Both the financing and the actual construction terms for the project remain to be negotiated.
"Of course Palin's inflating what she actually achieved here," said Reynolds. "You betcha."
Even if the pipeline is actually built, and the natural gas comes on stream, it will only make a modest dent in U.S. dependence on foreign energy sources. If all goes according to plan, the pipeline could deliver around 4.5 billion cubic feet of natural gas per day -- a relatively small portion of the 60 billion cubic feet of natural gas presently consumed in the United States.
The Pinocchio Test
Both Palin and McCain have exaggerated the Alaska governor's accomplishment in launching a multibillion dollar pipeline project that will reduce America's dependence on foreign energy sources. They talk about the project as if it is already underway, when it has yet to be negotiated and nobody knows how much it will actually cost.
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