Recent speech by Alaska Governor

By Ben Spiess
Daily News Reporter

(Published November 18, 2000)

Gov. Tony Knowles said Friday that he backs
building a natural gas pipeline that runs to Fairbanks then down the
Alaska Highway to Canada and the Lower 48.

"My way is the highway," Knowles quipped during
the 7 a.m. speech before the Resource Development Council, a
nonprofit group that advocates developing Alaska's
resources. "An Alaska Highway pipeline will be the beginning of a
new economy for our state for the next 50 years."

Knowles' backing of the politically popular route
met an enthusiastic response among state officials and industry
executives. The construction would cost an
estimated $6 billion to $10 billion and could be finished by 2007. The
highway route would bring gas to Fairbanks, which
uses coal and fuel oil for electricity and heating, and hundreds of
permanent jobs in-state.

But proponents of a rival route along the Arctic
coast to Canada question if the highway route would be too
expensive to ever be built. They say their cheaper
project would give the state more money.

Driving this year's revival of gas pipeline
proposals, after more than decade of dormancy, are soaring natural gas
prices in the Lower 48.

With prices high, optimism bubbled high in the
hall at the Hotel Captain Cook, where Knowles spoke.

" 'My way is the highway' -- that's great," said
Mano Frey, local AFL-CIO head, as he shook Knowles' hand after the
speech. "If there is anything we can do to help,
just let us know."

Knowles' position on the pipe was hardly
unexpected as the governor and his staff have made broad hints that the
administration would back the highway route.
Knowles earlier said the project must hire Alaskans, provide revenue to
the state government and bring natural gas to the
state's residents, particularly those in Fairbanks.

All of Alaska's key political leaders now back the
highway route.

Knowles sped past other options for the North
Slope's gas reserves, including plans for converting the gas to liquid
form for the oil pipeline or shipping it to Valdez
or Kenai where it could be chilled, liquefied and shipped overseas as
liquefied natural gas, or LNG.

Communities along the oil pipeline route are
pushing an LNG project. North Slope Borough Mayor George Ahmaogak
said a pipeline to Fairbanks may help their plans.
Most agree there is enough gas on the Slope for multiple gas
projects. A spur line from Fairbanks to Anchorage
or Valdez could feed an LNG export project.

The most obvious losers with Friday's speech were
the Northwest Territories and Arctic Resources Co. from Houston,
Texas, a company hoping to build a Beaufort
pipeline, connecting the Slope with the Mackenzie River Delta.

Knowles' criticism of the Beaufort route focused
on environmental issues of putting a pipe in the Arctic seabed and
the time it would take to clear regulatory hurdles
with the project, suggesting such complications would erase any
cost advantage of the shorter route.

Forrest Hoglund, chief executive of Arctic
Resources, said Knowles' position "certainly makes our position more
difficult." But Hoglund said the cost advantages
of the Beaufort route remain. Gas prices will likely fall, and "the
markets will decide what this project looks like."

Pietro de Bastiani, assistant to Northwest
Territories minister Jim Antoine, said his government still supports the

Beaufort route. He said a pipeline tapping
Mackenzie gas would be economic without Alaska's reserves.

However, neighboring Yukon Territory supports the
Alaska Highway route. Much of the huge construction cost would
be spent there.

"We need this project," said Scott Kent, a member
of the Yukon Legislative Assembly.

What Exxon Mobil, Phillips and BP Amoco will do is
less certain. They are the three big owners of the North Slope's 35
trillion cubic feet of natural gas.

This week all three made optimistic but vague
comments about their plans for Alaska's gas. The companies hope to
jointly study a gas development project, said
Exxon spokesman Bob Davis.

Phillips and BP expect a decision on a preferred
project by the second half of 2001.

Reporter Ben Spiess can be reached at
bspiess@adn.com.