Among the new business that will greet the Obama administration next year is potentially a request for increased loan guarantees for the Alaska gas pipeline project for which TransCanada Corp. has been awarded the concession. However, the company is taking a wait-and-see approach to whether it will seek an increase in the guarantees, currently worth about $20 billion.

“You’ll have a new government inaugurated shortly, in a month or so, and at that time TransCanada will decide if we are going to go to Washington and put forward some ideas on that front or not. We’ve tabled nothing to this date,” Tony Palmer, TransCanada vice president for Alaska business development, told NGI last week.

In a recent interview TransCanada CEO Hal Kvisle remarked that he hoped loan guarantees available to the project, currently about $18 billion, could be increased. The guarantees were authorized by Congress in 2004 with the intent they would make it easier for a project developer to secure financing. The guarantees would cover cost overruns (see NGI, Dec. 15).

Palmer said the company is hoping that costs for pipe and other materials come down as a consequence of the weakening economy. “That’s happened in previous cycles. It hasn’t happened yet to any major degree for pipe, but it’s relatively early in the game,” he said. “Certainly from 2004 through today, oil and gas projects have experienced higher inflation than [the consumer price index].”

Assuming the project goes forward, the company won’t be ordering pipe until 2014 or later, after regulatory approvals are secured, according to Palmer. A lot can happen between now and then, he said.

It remains to be seen whether the major North Slope gas producers will sign up for the TransCanada project. BP and ConocoPhillips are advancing their own pipeline project, known as Denali, and ExxonMobil is wrangling with the state over revoked licenses to drill on the North Slope’s Point Thomson. Palmer said TransCanada has talked with all three producers as well as others about its gasline project. However, interest expressed by Russia’s Gazprom earlier this year was rebuffed. “TransCanada expressed no interest in their participation,” Palmer said. “We’ve said we’ll offer equity participation to parties that commit their gas in the initial open season.”

Now that it’s officially been awarded its license under the Alaska Gasline Inducement Act, TransCanada is eligible for reimbursement by the state of up to $500 million of its development costs. Between now and the project’s initial open season, 50% of costs are eligible for reimbursement. From the open season through licensing by the Federal Energy Regulatory Commission 90% of costs are eligible for reimbursement.

So far TransCanada has let some contracts for geotechnical work, terrain mapping, as well as small contracts for preliminary engineering and environmental work, Palmer said. The company has requests for proposals out for pre-engineering on the gas treatment plant as well. “We’ve certainly been very active commencing the initial work that will allow us to do the winter work this year,” he said.

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