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Company stays hopeful for Alaska gas pipeline

Posted: August 16, 2011 - 10:09pm

ANCHORAGE — Alaska lawmakers nervous about the state’s $500 million investment in a proposed natural gas pipeline have asked the company licensed to build it for proof that it was still viable.

Legislators spent two hours Tuesday questioning Tony Palmer, vice president of major projects development for TransCanada Corp.

They asked how many potential gas shippers had made commitments for space in the proposed pipe, which would carry gas from the North Slope to a distribution system in Canada.

State Sen. Sen. Bill Wielechowski, D-Anchorage, said lawmakers are at a crossroads on whether to continue backing the $41 billion project or an alternative, such as an in-state gas pipeline. That means finding out the status of commitment made by potential gas shippers to TransCanada and its partner, ExxonMobil, Wielechowski said.

“I’m finding it increasingly difficult to make these decisions when we don’t have this information, when we don’t have information on where this project is,” Wielechowski said.

Palmer acknowledged that the pipeline remains short of commitments from shippers that are crucial for the massive project.

Uncertainties out of TransCanada’s control, such as worldwide natural gas prices and other energy sources such as North America shale, likely contributed to the lack of progress.

Palmer said shippers’ reluctance to commit to space on a line would be eased if the Alaska Legislature removed two roadblocks: the lack of a long-term fiscal structure for natural gas taxes and a continued dispute over leases on the Point Thomson gas fields, which is a key supply component for a pipeline.

TransCanada in 2008 was awarded an exclusive contract to advance a pipeline project under terms of the Alaska Gasline Inducement Act, a centerpiece of then-Gov. Sarah Palin’s administration. The state promised to pay up to $500 million in costs to advance the project even without guarantees a line would ever be built.

Palmer reminded legislators that TransCanada has met all targets for advancing the project in technical and regulatory requirements.

He said 110 people are working on the pipeline full-time, along with contractors. That includes 170 people in the field in Alaska and Canada this summer.

Through June, Palmer said, the companies had spent $288 million on the project and had been reimbursed for $94 million, though the latter figure will increase significantly. The company has lowered its return on equity and increased its risk to make the pipeline more competitive.

“I’m very confident that we have a competitive pipeline tariff on the table,” Palmer said.

Some lawmakers said the state likely is committed to spending the entire $500 million. But Wielechowski said that could be visited in the legislative session next year if it was apparent the project was not viable.

Wielechowski said he was willing to sign a confidentiality promise for a look at the progress TransCanada has made.

Palmer, though, said there are good reasons for keeping the information private.

TransCanada remains unwilling to reveal information outside its agreement with the state, such as where customers, if they are also producers, would put natural gas in the pipeline or deliver it.

“That can affect the value of the land leases,” Palmer said. “That can affect the value of competitive markets at both ends of the pipe.”

TransCanada’s potential customers have been clear in what they need, he said: Point Thomson gas and a long-term gas fiscal deal with the state.

TransCanada three years ago was told not to become a party to that issue.

“We’re highly interested observers, but to date those issues have not been resolved,” Palmer said.

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