New snag for gas project

Mountain peaks, earthquake zones, and frozen tundra -- such are the natural obstacles to bringing large reserves of Alaskan natural gas by pipeline to American consumers.

But the key challenge to the mammoth alaskan natural gas pipeline project now appears to lie in the concrete canyons of Wall Street. It is there the project sponsors must engineer private financing in a manner acceptable to Congress and the Reagan administration.

And that task looks so tricky that some analysts predict the project ultimately will not be completed.

It seems clear the important and most costly Alaskan segment of the 4,800 -mile pipeline system will not be built and financed as originally planned.

As the financial prospects for the project grow more clouded, some analysts see wisdom in reopening the debate over whether a pipeline is the most economical way to move Alaskan gas to the lower 48 states. Some wonder if the gas should be produced at all.

"We're trying to convince Congress that what is really needed is a fresh look at the whole issue," says Lawrence Goldstein of the Petroleum industry Research Foundation.

Important decisions about the Alaskan Natural gas Transportation System, as the entire project is called, were made by Congress and President Carter between 1976 and 1978, when concern over energy shortages was prominent.

Today, the energy picture has improved somewhat, and some attitudes about the gas project have changed.

"Two or three years ago I would have said we needed it, but now I'm not sure, particularly at its project cost," says Adam Sieminski of the Washington Analysis Corporation, a subsidiary of a large New York brokerage firm.

At stake are 26 trillion cubic feet of natural gas under Alaska's north Slope -- the largest single proven gas reserve in the United States. The field was discovered in 1968 but remains locked beneath the tundra until a delivery system can bring it to market.

Current plans call for a pipeline from the North Slope to Alberta, where it would split into two legs which would terminate in Chicago and San Francisco. Construction is already under way on the legs from Alberta into the United States.

However, the real energy prize of the huge project is the North Slope reserves. Whether they will be tapped remains clouded by the troubled Alaskan segment.

The 739-mile stretch of pipeline in Alaska, along with a natural gas conditioning plant, would cost about two-thirds of the total project cost of $25 billion to $35 billion, according to most analysts.

The step and rising price tag has forced pipeline sponsors to seek financial help from the four major oil companies that would produce the natural gas.

These firms -- Exxon, Atlantic Richfield, Standard Oil of Ohio, and Phillips Petroleum -- want some ownership of the pipeline if they are to help finance the project. Negotiations over the rate of ownership are under way.

However, any equity ownership by the producers was prohibited in a 1977 decision by President Carter because of antitrust considerations. President Reagan and Congress would have to amend that decision to allow producer ownership.

"We will need congressional resolution of the issue," concedes a spokesman for northwest Alaskan Pipeline Company, the operating partner in a consortium of 11 US and Canadian companies sponsoring the Alaskan segment of the pipeline.

Energy analyst Sarah G. Mott of the Government Research Corporation in Washington says she believes such a new arrangement -- allowing the producers to own part of the pipeline -- would clear Congress. While predicting opposition from some legislators, she asserts the new arrangement would be approved because of "our commitment to the Canadians to build the project."

The pipeline segments from Alberta to the United States now under construction will also bring canadian gas to this country. Ultimately, Canada hopes to use the northern reaches of the pipeline for tapping new gas reserves in the Canadian Arctic region.

Even if the issue of equity ownership is resolved, some analysts believe banks, insurance companies, and other investors will remain reluctant to loan money for the project without some form of federal loan guarantees.

"Ultimately, the government must get involved," asserts Mr. Sieminski, who sees the project as otherwise too risky for private lenders.

Yet there is serious doubt that the Reagan administration, with its stated policy of limited government involvement, would support loan guarantees. On his recent visit to Canada, President Reagan voiced support of the pipeline "based on private financing."

Asked about the prospects for federal loan guarantees, the spokesman at Northwest Alaskan Pipeline Company responded, "I don't see that as a political reality."

The economics of the Alaskan segment are made more unclear by the prospect of faster and more complete decontrol of domestic natural gas prices. If the Reagan administration moves ahead with such a program, it could make the Alaskan gas less attractive.