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Gov. Sarah Palin's recent proposal to supply Alaska's in-state energy needs with a natural gas bullet line has gotten a mixed reaction so far from lawmakers from the Kenai Peninsula.

On July 7, Palin announced the formation of a public-private partnership between the Alaska Natural Gas Development Authority, Enstar Natural Gas Company, and the state to build the first phase of a bullet line within the next five years.

The project would be designed to stimulate new exploration in Cook Inlet and the Copper River Basin and to supply Southcentral and Interior Alaska with a long-term supply of gas.

Palin proposed building a line from Cook Inlet to Fairbanks by 2013. If concurrent exploration found developable deposits of gas in the Inlet and along the pipeline route, that gas would be available to in-state consumers. If no gas were found, the line could be extended to access gas in the North Slope Foothills or beyond, making gas available by 2014, the governor said.

Eventually, the in-state line could be connected to the main North Slope line when it is finished around 2018 to 2020, the governor said.

Palin's proposal is interesting and worth exploring, Rep. Paul Seaton, R-Homer, said Tuesday, but much will depend on attracting exploration companies with a profitable market.

"The big problem as identified in Cook Inlet has been that prices were so low because it's a stranded basin with no market for the gas," Seaton said.

The Palin proposal, he said, was a move toward creating a viable market, and to satisfy some immediate local needs, especially in Fairbanks where gas prices are high. If sufficient gas were not found in Cook Inlet, the bullet line would amount to "a pre-built spur line" ready to attach to a future North Slope gas line to the Lower 48.

"There are two things nobody knows," he said. "Is the Cook Inlet Basin still gas rich? Or is there no gas? Either way, if we have a pre-built spur line, we would be able to market the (Cook Inlet) gas, or be ready to bring flow in from the (main) gas line. It's an idea worth exploring."

Sen. Tom Wagoner, R-Kenai, said he believes there is more gas to be tapped in Cook Inlet.

"Whether we (government) will incentivize exploration or not, I don't know," he said in an interview late last week.

The project amounts to building a gas line to meet Fairbanks' needs at state expense, he said, adding that he wondered if ratepayers there could afford the tariff to bring Cook Inlet gas north if the line is not also extended to the North Slope so gas could also be brought south.

"I feel sorry for the people in Fairbanks," he said. "A lot of businesses are bleeding hard (with high energy costs). But it's always been tough up there."

Rep. Kurt Olson, R-Soldotna, noted other questions with no answers yet. First, the bullet line concept in most peoples' minds has been one bringing North Slope gas directly to Southcentral Alaska and the Kenai Peninsula, not sending Cook Inlet gas north. The other question is whether there is new gas available under Cook Inlet.

"If we had that (cheap) gas, Agrium would still be open," he said. "We don't have the luxury of shipping gas north."

He also wondered if companies would bother exploring for gas in Cook Inlet when North Slope gas will eventually be available to Southcentral Alaska.

Still, the idea proposed by Palin is in its conceptual phase, Olson said, adding that some kind of bullet line should be pursued.

He also noted that while Marathon and others are drilling for gas in Cook Inlet now, they are mostly seeking supplies to fulfill existing contracts.

Rep. Mike Chenault, R-Nikiski, said he be "the happiest guy" if he learned there was gas on the peninsula he didn't know about.

"I know that's not true," he said.

The pipeline idea, he said, looks to have been thrown together to give the impression something is being done about in-state gas needs. A lot of the public testimony state lawmakers have heard while touring the state recently has centered on the need for a steady supply of natural gas.

If a pipeline project would encourage more exploration, that might be a good thing. But it becomes a kind of chicken-or-egg question.

"I have a hard time thinking that an exploration company will come to the Kenai Peninsula to invest hundreds of millions of dollars if there is no market or good price," he said. "Exploration companies are looking for a return on their money. That's what they're charged with. If there is hope of a reasonable return, that's when they make their investments."

Sen. Gary Stevens said he assumes there is gas yet to be found and developed in Cook Inlet.

"But there are so many unknowns about that," he said Tuesday. "We are going to need more certainty before we build a gas line. 'Build-it-and-they-will-come' is not necessarily a wise business approach."

While it may be a good idea to take Cook Inlet gas -- if there is any -- north to Fairbanks, like Olson, Stevens said a south-to-north concept for a bullet line is something new to hash over. And right now, state lawmakers are so busy with the TransCanada proposal under the Alaska Gasline Inducement Act (AGIA) that little attention is being paid at the moment to Palin's pipeline.

"AGIA is where everyone's energies are," he said.

As proposed, the bullet line would move about 460 million cubic feet of gas per day, about twice what Alaskans currently use daily. The gas line is one part of a larger set of priorities, Palin noted in a press release July 7.

"We have been working diligently on implementing a statewide energy plan to put Alaskans first, and this development project is a critical component of that plan," she said.

Her statewide plan includes short-term relief through energy rebates and state tax suspensions; developing reliable energy alternatives, conservation, and an in-state pipeline complementing AGIA; and construction of a large gas line from the North Slope into Canada and beyond.

Hal Spence can be reached at hspence@ptialaska.net.