An Alaska gasline project that would move North Slope gas into Western Canada for further transport on TransCanada Corp.’s existing pipelines there would bring a benefit to Canadian producers in the form of lower tolls to ship their own production, TransCanada’s Tony Palmer told conference attendees in Calgary last week.

“By integrating Alaskan gas into the existing infrastructure in Western Canada, the netbacks for Alaskan gas will be higher by about 30 to 40 cents, so there is a very significant benefit for Alaskan gas. However, there’s also a large benefit for Canadian gas by integrating that gas into our existing system,” TransCanada’s Alaska vice president told attendees at the Interstate Oil and Gas Compact Commission’s Midyear Issues Summit.

“It’s expected there will be very dramatic amounts of spare capacity [in Western Canada] and the tolling systems in Canada are such that if you refill those systems, you spread the costs over a larger base and the tolls decline,” Palmer explained. “Pipeline companies do not earn one penny more. Volumes on Canadian pipes do not affect the returns of Canadian pipes; it very much affects the tolls for customers. So over the first 15 years [of an Alaska gasline to Canada] we have projected that there will be a toll reduction for Canadian producers of $10 billion if you integrate Alaskan gas into our system at Boundary Lake [on the British Columbia-Alberta border]. If you were to integrate it commercially [upstream] at Fort Nelson [in British Columbia] instead of that, about $3 billion of that value shifts from Western Canadian producers to Alaskan producers.”

Indeed, Palmer allowed that there is expected to be 4-5 Bcf/d of excess capacity on TransCanada’s Western Canadian system in 10 years, up from an approximately 2 Bcf/d of spare capacity now.

TransCanada is the only company applying to construct an Alaska gasline under the state’s Alaska Gasline Inducement Act (AGIA) to make it to the second round of review. Competing proposals were disqualified for not meeting all of AGIA’s requirements (see NGI, Jan. 7). The Alaska legislature is due to hear from the AGIA committee during the week of May 19 on whether the TransCanada proposal will be submitted to lawmakers for approval. If it is, they will have 60 days to make a decision. A competing project, known as Denali, was recently submitted by producers ConocoPhillips Inc. and BP plc outside of the AGIA process (see NGI, April 14).

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 Gov. Sarah Palin, alleging that the selection process was noncompetitive, faulting it particularly for failing to attract bids by producers (see NGI, Feb. 25; Jan. 28). Last week Palmer reasserted TransCanada’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.”

Drue Pearce, federal coordinator of Alaska natural gas transportation projects, said at the conference that both Denali and TransCanada’s proposals are viable, “so the AGIA process has proven that it can get the momentum started; it can get the ball rolling. And I think that’s what you’re seeing today.

“It’s probably in Alaska’s best interest if at some point in time all of these entities comes together and we end up with just one project. However…neither the Office of the Federal Coordinator nor FERC [Federal Energy Regulatory Commission], nor any other federal agency is in a position to choose…to decide which project is going to move forward…We will work to expedite every project that comes forward to the federal government.”

Sue Kirby, Natural Resources Canada assistant deputy minister for energy, said any Alaska gasline project would benefit Canada. “However, different project configurations can provide different benefits from a Canadian point of view, and that is important to us. Canada would prefer a pipeline from Alaska that connects with the Alberta Hub and allows for some refill of underused [pipeline] capacity,” she said.

Additionally, the petrochemical industry in Alberta would like access to Alaska ethane streams to feed its plants and allow greater use of ethane extraction straddle plants in western Canada. “Due to a combination of rising gas demand in Alberta and declining production from conventional sources, existing pipelines are underutilized and this situation also exists for ethane extraction plants,” Kirby said. “This causes higher pipeline transmission rates than necessary and use of Alaskan gas to refill would benefit Alaska producers, Western Canadian Sedimentary Basin producers and also all North American customers.”

Like Pearce, Kirby did not express any preference for the Denali project or for TransCanada’s. “We continue to monitor both projects, and our preference is to have a project go forward and to have the private sector deal with commercial disputes,” she said, promising an efficient project review by Canadian regulators when the time comes.

Pearce noted that some in the industry have pondered whether an Alaska gasline should come before or after the long-awaited Mackenzie gas pipeline project (see NGI, April 28). “It’s not an either-or. It’s both that are going to be needed when you look at the projections over the next 20 [years] and on to 50 years in the life of these projects,” she said. “We’ve been very supportive of the efforts on the Canadian side of the border to build the Mackenzie line.”

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