Calpine Corp., which represents one of the largest natural gas appetites in North America for its sizable fleet of gas-fired electric generating plants, confirmed Thursday that it is in preliminary talks with Alaska Gasline Port Authority (AGPA) about becoming one of the long-term customers for Alaska’s estimated 6 Bcf/d of North Slope supplies.
Although not a formal memorandum of understanding, the deal involves a “determination of feasibility” with the nonprofit AGPA, a consortium that includes the Fairbanks and Valdez boroughs, in a long-standing plan to develop a municipally owned natural gas pipeline to bring North Slope supplies to the Lower 48 states through a possible combination of pipeline and liquefied natural gas (LNG) tanker shipments. A third borough near the source of the supplies — the North Slope Borough — was a member, but recently withdrew from the group, according to a news report in the Fairbanks Daily News-Miner.
“This is an exciting project — particularly if an LNG receiving terminal is developed off California,” said a Calpine spokesperson. “We see a lot of benefits not only for Calpine, but for the state of Alaska and customers in the Lower 48 states.”
Jim Whitaker, a local Fairbanks elected official who serves on AGPA’s board, said that Calpine has “committed to negotiate a fair price on a long-term basis,” according to the report in the News-Miner.
Calpine is attracted to several aspects of the municipal pipeline proposal, according to its spokesperson, including the nonprofit, federal tax-exempt status of the pipeline authority, which Calpine hopes will translate into significant savings on gas prices, and also the flexibility of having the supplies come in the form of both overland pipeline and oceanic LNG.
While citing a 2000 letter from the U.S. Internal Revenue Service, Fairbanks Mayor Whitaker acknowledged that critics argue that the AGPA is not assured of avoiding federal income taxes on its projected profits, the local news report cited.
Besides lining up buyers downstream, the AGPA must also line up deals upstream with the major oil/gas interests that own the North Slope supplies, including Exxon Mobil, BP Exploration (Alaska) Inc. and ConocoPhillips, all of which have applied to the state to build a competing pipeline project.
The local report cited Calpine’s vice president for natural gas, Brad Barnds, as labeling the North Slope gas as very important to Calpine’s power plant operations in the Lower 48 states. Barnds called the company the “largest consumer of gas in the United States,” and one that is “uniquely positioned to take a significant portion” of the Alaska gas.
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