In a report released February 2 commissioned by the Office of the Federal Coordinator, Roger Marks examines the economics of a large scale natural gas pipeline to the Lower 48 compared to a state-subsidized in-state gasline.
Tax and royalty revenues would be much higher with the large line to the Lower 48, because the mainline would carry much larger volumes of gas at lower prices. The report shows that a $2 wellhead price for gas (or $7 sales price in the Lower 48), the annual public revenues would be $326 million for an in-state line and $2.3 billion for a mainline. If prices are higher, say a $5 wellhead price, the mainline would generate ten times the public revenue of an in-state line, because the production tax for in-state gas is currently fixed at a specific amount regardless of price.
The price of gas to Southcentral consumers would also be less with a mainline than an in-state line, because the gas would travel half the distance to Southcentral on the mainline with its significant economies of scale. Costs to Fairbanks would be even lower, because the gas would come directly from the mainline without requiring construction of a spur line.
Finally, the much larger volumes of gas that can be shipped on the mainline should spur additional North Slope exploration for both gas and oil. Read the full report here.
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