Alaska Gov. Frank Murkowski has a preliminary agreement in hand with the big three North Slope producers to build a natural gas pipeline to the Lower 48, but besides legislative hurdles, pipeline operators have to be appeased, state legislators were told on Thursday. TransCanada Corp., which claims to hold sole rights to construct the project, promises to fight for the right to build the Canadian portion of the line.
Murkowski’s staff struck a deal with BP plc, ExxonMobil Corp. and ConocoPhillips two weeks ago to build a $25 billion North Slope line, which is tied into an overhaul of the state’s production-based oil and gas revenues (see Daily GPI, Feb. 23). Legislators, who have been asked to approve of the tax changes first, are now hearing testimony on the proposed pipeline from producers, pipeline operators and affected stakeholders.
However, even before the tentative pipeline deal was put together, there already had been criticism over the near-exclusive attention the producers had been getting while other potential project sponsors, including TransCanada and Enbridge Inc., waited to be included. Tony Palmer, vice president of Alaska business development for TransCanada, said there could be problems if negotiations with his company don’t begin soon. The Calgary-based pipeline, he said, will fight for its right to build the Canadian portion of the proposed pipeline.
“TransCanada does not want to obstruct this project, but at the end of the day we have the sole right to construct this project,” Palmer said. The company claims it holds the rights to any pipeline from Alaska under Canada’s Northern Pipeline Act of the 1970s, and Palmer said the permits and rights of way are still valid.
The producers, which also want to control the pipeline, are disputing TransCanada’s claims, and now, with the pipeline negotiations under way, TransCanada’s claims are seen as a possible threat to the plan. Palmer said the producers have refused to talk with TransCanada until the Alaskan negotiations are completed. But, he added, the ball is in the producers’ court. Palmer said TransCanada is ready to work with producers when a deal with the state is finalized.
“TransCanada seeks collaboration and alignment with the producers to get the project done quickly,” Palmer said.
The producers expect the entire pipeline, from the North Slope to the Lower 48, will take about 10 years to build. TransCanada estimates it would take seven years to complete the 1,000-mile Canadian portion of the line from the Alaska border to Alberta, where it would hook into existing systems for markets to the Lower 48.
Because of the amount of time the pipeline will take to build, Palmer also tried to discount suggestions that another pipeline company — such as competitor Enbridge — be included. He said it will take more time for another pipeline operator to negotiate permits and rights of way that TransCanada already holds.
If the producers build the entire pipeline, they would control gas transportation, subject to federal regulation. Lawmakers acknowledged a situation similar to the Trans-Alaska oil pipeline system has been overshadowed by years of disputes over lack of access by smaller oil producers. Palmer noted if TransCanada builds the line, any gas producer could strike a deal for access.
Rep. Ralph Samuels, co-chair of the Alaska House Resources Committee, suggested the producers begin talking with TransCanada about possible conflicts while negotiations with Alaska are ongoing.
“I think the producers should be looking at the permitting right away,” Samuels said. “They have to start talking to TransCanada now.”
Sen. Gene Therriault, R-North Pole, added that an independent pipeline owner could benefit the state because it would be more willing to expand capacity as the project progressed.
“Their whole motivation is to ship more gas,” Therriault said.
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