If the natural gas pipeline deal put together by Alaska Gov. Frank Murkowski and the “Big Three” North Slope producers falls through, TransCanada Corp. still has a “realistic alternative” on the table, CEO Hal Kvisle told the governor in a letter earlier this month. TransCanada claims to hold valid permits and rights of way to construct the project from Alaska into Canada under Canada’s Northern Pipeline Act, which was enacted in the 1970s.

The Alaska Legislature began a special session in mid July to consider an oil tax proposal and gas pipeline deal put together by Murkowski and BP plc, ExxonMobil Corp. and ConocoPhillips (see NGI, July 17). Murkowski, who has warned that the state could lose its opportunity to build a gasline unless action is taken soon, wants a deal struck within a month.

Murkowski addressed the special session on July 13, and he indicated he had received support for the gasline from TransCanada. TransCanada submitted a Stranded Gas Act application with Alaska in 2005, which Murkowski noted had expressed support for the contract under consideration with BP, Exxon and Conoco. However, Murkowski only read a portion of Kvisle’s letter to legislators.

“We encourage the state of Alaska to resolve the outstanding issues, ratify the agreement and move forward,” Kvisle wrote in a portion of the letter. “We believe commercial negotiations will lead to a reasonable ‘win-win’ outcome in Canada…We are prepared to engage immediately to negotiate a commercial framework for the Canadian section, with the intention of including that framework in your agreement with the producers.”

In the rest of the letter, Kvisle noted that if the pipeline were built by TransCanada, it could be an “economic and viable alternative” to the producer contract. TransCanada has expressed a public interest to build the pipe since at least 2004, when it declared that it was prepared to take on 100% of the responsibility to piece the development together (see NGI, May 3, 2004). Consortium aside, Kvisle said it’s time for action.

“TransCanada holds valid property rights to build and own the Canadian section of the project, and we have no option but to defend those rights on behalf of our Canadian shareholders,” Kvisle wrote. He noted that the Calgary-based pipeline is now discussing commercial ownership arrangements for the Canadian portion of the line, which would extend from the North Slope into Canada to supply the Lower 48. However, Kvisle said TransCanada would be willing to negotiate to be included in the agreement Murkowski has tentatively struck with the producers.

“The shipping terms and risk sharing mechanisms contained in our proposal were innovative, competitive and economically sound,” Kvisle wrote.

Earlier this year, Kvisle said in an interview with reporters that he wanted to resolve the pipeline issue without a legal fight. “The resolution of how the pipeline gets through the Yukon and northern (British Columbia) is something we really want to work on and resolve in a commercial sense with the Alaska producers, rather than in any legal way,” Kvisle said. “We think that’s how this project will come together.”

Brian Frank, CEO of BP Canada Energy Co., said discussions are under way with TransCanada to help mitigate the gas pipeline’s risks or to add value. However, Frank said BP, Exxon and Conoco don’t believe TransCanada has the right to build the Canadian portion just because it received permits 30 years ago.

“We are talking to them as a commercial counterparty,” Frank told The Alaska Report in June. “The discussion is around ‘what can we do that benefits you, and what can you do that benefits us?’ We are engaged in conversations to see what they can do to enhance the probability of the project going forward.”

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