TransCanada Corp. last week filed an application under the Alaska Stranded Gas Development Act (SGDA), which assures fiscal terms should the company and the state come to an agreement on building a gas pipeline project. TransCanada now plans to proceed with processing its right-of-way application for the Alaska Highway pipeline.
CEO Hal Kvisle said in the upcoming months, the company will be holding information sessions with the public at various locations in Alaska along the proposed route.
In April, TransCanada signed a memorandum of understanding with the state, committing to filing under the SGDA in exchange for the state dusting off its 1980s right-of-way lease. TransCanada currently owns all the right of way outside the state of Alaska for the pipeline route.
In Alaska, the pipeline most likely would extend about 745 miles along the Alaska Highway from Prudhoe Bay south through Fairbanks to a connection with the Canadian portion of the project at the Yukon border. The project would then traverse about 1,000 miles of western Canada from the Yukon Territory, across northern British Columbia and then ending somewhere in Alberta at a connection with the existing Canadian gas grid. It is expected to deliver 4-6 Bcf/d of gas.
TransCanada is among many other companies that have filed or plan to file applications under the SGDA, including Enbridge, 13 Alaska Native corporations, Pacific Star Energy, the Alaska North Slope producers (ConocoPhillips, BP, and Exxon), and the Alaska Port Authority group made up of the City of Valdez and the Fairbanks North Star Borough. Another applicant, MidAmerican Energy Holdings, withdrew its application after the state declined to give it a five-year exclusive right to build, own and operate the pipeline.
TransCanada has said all along that it does not expect to shoulder the pipeline burden alone but instead will be part of a consortium of companies, possible state entities and native Alaskan organizations. TransCanada anticipates that fiscal negotiations between the state of Alaska and the North Slope producers will continue at the same time as right-of-way activities and the review of TransCanada’s SGDA application are taking place.
Once its right-of-way lease application is approved, TransCanada said it would be prepared to convey the lease to another corporation or partnership if appropriate commercial agreements are in place. The lease conveyance also would require an interconnection agreement with TransCanada at the Yukon-Alaska border.
In the meantime, TransCanada said it intends to continue playing a “leadership role” in both Canada and Alaska to advance the Alaska Highway pipeline project. While it begins negotiations with potential partners, this summer the company also intends to begin a public education campaign on the project with a series of open houses and meetings.
“We will be providing communities along the proposed route with general pipeline information and gathering their input to be incorporated into our plans for the Alaska Highway pipeline,” said Kvisle. “Although the original route application was filed years ago, we have updated the design to include the latest in technology and to ensure we meet or exceed today’s environmental and regulatory standards.”
Late last month the Alaska Department of Revenue held opening discussions with investment banking firms regarding possible pipeline financing options available to the state, and defining the financial and operational risks of several possible scenarios. Department officials and personnel met with Merrill Lynch, Goldman Sachs, UBS Financial Services, JP Morgan, CitiGroup, and First Southwest.
The size and complexity of the project may require multiple firms to participate in any financing package. Talks with other investment banking firms will take place throughout the summer.
“It is important to examine all options available to the state, and begin to define risks, as we look to what commitments must eventually be made in bringing Alaska’s gas to market,” said Alaska Gov. Frank H. Murkowski. “The state has a long position in petroleum resources, including natural gas, and much of the United States is very short; how we capitalize the transportation systems will impact Alaskans and the U.S. energy future for the next 50 years.”
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