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Proposed Alaska Pipelines Face Additional Hurdles, FERC Says

As if the construction of an Alaska natural gas pipeline isn't daunting enough, FERC told Congress Wednesday that "greater progress" needs to be made on support infrastructure before work on the pipeline can even begin.

"Recent infrastructure needs assessments...indicate that a large number of projects to improve or repair highways, bridges, ports and airstrips must be completed prior to initiating construction of an Alaska natural gas pipeline," the Federal Energy Regulatory Commission said in its eighth semi-annual report to Congress on the progress of an Alaska pipeline. There currently are two projects competing to build a pipeline; the Denali pipeline, a joint venture by BP plc and ConocoPhillips, and the TransCanada Alaska Co. LLC (TC Alaska), which has the support of ExxonMobil.

"Because these infrastructure improvements are long-term efforts that require permitting and funding, greater progress in this area must be made to avoid conflicting with the projected time line for pipeline construction," the agency said in the nine-page report.

Both the TC Alaska and Denali projects are undergoing FERC's pre-filing review process, which allows a review of a project to begin prior to receipt of an application. The two projects also have announced their intentions to conduct open seasons in 2010.

TC Alaska, the licensee under the Alaska Gasline Inducement Act (AGIA), proposes to construct and operate a 5 Bcf/d, 48-inch diameter line to transport gas from the North Slope to markets in the Lower 48 via the Alberta Hub. In June TransCanada said it had reached an agreement with affiliates of ExxonMobil to work together on the pipeline (see NGI, June 15).

TC Alaska remains the project sponsor with FERC and will also remain the AGIA licensee (see NGI, Aug. 4, 2008). But "TransCanada and ExxonMobil are now jointly advancing all aspects of the project -- technical, commercial, regulatory and financial -- by sharing of certain expenses and information," FERC reported. The TC Alaska line is expected to cost. $26 billion and make deliveries into Canada and the Lower 48 by 2018, assuming it receives FERC approval (see NGI, Aug. 3).

The Denali line took a small step backward in August when it informed FERC that it will delay filing its application for a certificate for more than a year. Originally scheduled for filing with FERC in August 2011, the company has now pushed back its plans until the fall of 2012.

"We're delaying the [certificate] filing until October of 2012," Dave MacDowell, a Denali spokesman, told NGI. "When we decided to focus exclusively on the work required for our open season in 2010, we deferred some of the field work that we could have done in 2009 because it wasn't needed to support that open season. We now have what we need to support the open season in 2010, but we need two full seasons of field work to support the [certificate] filing, so the new filing date allows for a full 2010 and 2011 field survey effort."

According to a proposed timeline on Denali's website, the company hopes to have permit approvals from FERC and the National Energy Board by 2014, followed by four years of construction with first gas coming online in 2018.

In a July update, the company said it was still working on the project's cost estimate, but noted that "Denali does not require state funding to move forward." The joint venture added, "The economy and competition has not changed our focus."

Denali is proposing a 3,500 mile pipeline to transport 4 Bcf/d of gas to consumers in Canada and the United States. The project would consist of 2,000 miles of pipe from the North Slope to Alberta and "possibly" another 1,500 miles down to Lower 48 markets.

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