Proving that it pays to follow instructions, TransCanada Corp. has been chosen by Alaska Gov. Sarah Palin and her administration to build a pipeline from the North Slope to Alberta to commercialize the state’s vast natural gas reserves. The pipeline company’s proposal, called TC Alaska, will be presented to state lawmakers, who will have 60 days to decide whether to move forward with the project.

During a press conference Thursday Palin praised TransCanada for meeting all of the requirements of her Alaska Gasline Inducement Act (AGIA). “Everything we asked for in AGIA to protect Alaska interests is in the TC Alaska proposal,” she said.

The TransCanada proposal gives the state a certain timeline for pipeline development, provides for future expansion of the pipeline to accommodate additional North Slope producers and offers low transportation rates, Palin said.

TransCanada was the only company applying under AGIA to make it to the second round of review. Competing proposals were disqualified for not meeting all of AGIA’s requirements (see Daily GPI, Jan. 7). A competing project, known as Denali, was recently submitted by producers ConocoPhillips Inc. and BP plc outside of the AGIA process (see Daily GPI, April 9).

Thursday Palin rejected the Denali proposal for coming up short on a number of fronts when compared to TC Alaska. Palin said TC Alaska will give Alaskans the assurance that a pipeline will be developed, with the promise of greater royalties when one is. “We have our interests as Alaskans, and we’re not going to yield on AGIA’s required elements for a project,” Palin said. “Never has it been more important to keep our bearing than right now.”

While TC Alaska does not include development of liquefied natural gas (LNG) facilities, LNG could be added at a later date, Palin stressed. Also an option for the future is a bullet pipeline to serve gas-starved South Central Alaska with North Slope supplies. This is not part of AGIA but could be developed in concert with the TC Alaska project, Palin said. “It can happen and is specifically allowed within AGIA.

“We asked the legislature to approve an expedited study of the bullet line because both projects can move forward simultaneously…There’s enough natural gas up there to fill both lines.”

To get the TC Alaska project to the open season stage, TransCanada will be eligible for up to $500 million in matching funds from the state. This, Palin said, is a small price to pay for all of the assurances that the TC Alaska proposal offers when compared to Denali, the producer offering. Palin said that concessions to the producers under the Denali proposal would have cost the state more than $10 billion. “It means that Alaska receives more value, especially on royalties,” Palin said of TC Alaska.

When it was determined that TransCanada was the only project to qualify under AGIA, some in Alaska and elsewhere were critical of the AGIA process and Palin, alleging that the selection process was noncompetitive, faulting it particularly for failing to attract bids by producers (see Daily GPI, March 18; Feb. 25; Jan. 28). Recently Tony Palmer, vice president of Alaska operations for TransCanada, reasserted the company’s belief that AGIA was fair and competitive.

“Only one party made it through the first screen. Only one party, TransCanada, was deemed to have a complete application,” Palmer said. “I would tell you that TransCanada, when we filed, did not know how many competitors would be there and had to do what any party participating in an RFP [request for proposals] process has to do, which is you have to put your best foot forward. We competed. We bid to win. And we did so competitively. That is the norm in an RFP process. Competition does not occur after you bid. It occurs before you bid” (see Daily GPI, May 6).

Palmer, who was at the Thursday press conference, said that producers that commit gas to the TC Alaska project during an open season would be eligible to take an equity stake in the pipeline.

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