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Alaska Senate Takes Up TransCanada Gasline Proposal

Alaska House lawmakers last Tuesday approved a license for TransCanada Corp. to develop a long-sought pipeline that would tap North Slope gas reserves and carry them to Canada and Lower 48 markets. The Senate is to weigh the proposal with a vote expected late this week.

In the House the vote was 23-16 in favor of HB 3001, the legislation awarding TransCanada a license. Senate lawmakers have until Aug. 2 to make their decision.

"I appreciate the House moving this important legislation to a floor vote." Gov. Sarah Palin said last week. "I appreciate all of the hard work and careful consideration that went into this vote and look forward to seeing the Senate take up the legislation next week. This is an important step toward protecting Alaskans and energizing our state while securing the nation's energy supply."

TransCanada -- which for the purposes of the gasline is called TC Alaska -- was the only successful applicant under the Alaska Gasline Inducement Act (AGIA). Four others were disqualified for submitting applications that were deemed to be incomplete. Last month a competing gasline proposal backed by producers BP and ConocoPhillips was approved for pre-filing review at the Federal Energy Regulatory Commission (see NGI, June 30).

The project, known as Denali, is not in line for the same $500 million state subsidy that TransCanada could receive if it gets the AGIA license. The Denali backers say they don't need the subsidy and that appeals to some Alaska lawmakers. However, the Denali proposal has been criticized for lacking the detail of the TransCanada proposal.

The TransCanada proposal is for a 4.5 Bcf/d, 48-inch diameter, mostly buried pipeline running 1,715 miles from a gas treatment plant at Prudhoe Bay on the North Slope to the Alberta Hub in Canada. It could cost $30 billion or possibly more. The Alaska section would be about 750 miles long with six compressor stations at startup and five gas delivery points in Alaska. The application includes an expansion capability of up to 5.9 Bcf/d. Further expansions would include a combination of additional compression and looping.

According to the state, commitments made by TransCanada include:

"This plan puts Alaskans first. Everything we asked for in AGIA to protect Alaska's interests is in the TC Alaska project. In fact, because of the competitive process, TC Alaska's proposal is a better proposal than we'd even hoped for and everything in its proposal is binding and enforceable," Palin said at the time her gasline team selected TransCanada's proposal over the Denali proposal.

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 NGI, Feb. 25; Jan. 28). Earlier this year 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 NGI, May 12).

Despite what happens with TransCanada, the Denali backers have said they are moving forward with their project. ConocoPhillips CEO David O'Reilly, during a conference call to discuss quarterly earnings last Wednesday, said his company was waiting to see "how things sort out" in the Alaska Legislature with regard to Denali and its competition with TransCanada.

"Irrespective of what takes place, we continue to go forward with BP on Denali," he said. "We are doing field work this summer, and we expect to have an open season in the next few years." What the legislature did last Tuesday "doesn't change at all our aggressiveness in the plan on Denali for ConocoPhillips and BP."

Asked if ExxonMobil had indicated whether it would join the Denali project, O'Reilly was cautious.

"Ultimately we would like to see everyone participating on the [Denali] pipeline, all producers participating. All of that remains to be seen, and I shouldn't be speculating for another company like Exxon. But ultimately everyone needs to participate."

Heretofore ExxonMobil has been coy about committing to the Denali project (see NGI, May 5).

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