Gov. Sarah Palin's attempt to wrest control of development of Alaska's vast natural gas reserves away from the world's big petroleum companies may hinge on a medium-sized Canadian pipeline company.
TransCanada Inc., a Calgary, Alberta-based company, is waiting to see if the Palin administration will forward its pipeline proposal to the Legislature for approval in the week of May 19.
"We're in a position to provide a great deal of value to Alaska," said Tony Palmer, vice president of Alaska Development for TransCanada.
Palmer met with the Juneau Empire editorial board as part of a statewide tour prior to a June 3 special session of the Legislature to consider issuing a state "license" to TransCanada under the Alaska Gasline Inducement Act.
That license would qualify TransCanada for a state subsidy on the pipeline, but impose some obligations on the company to operate the line in ways good for Alaska.
Palmer declined to say whether he thought the scheduling of the special session meant that the Palin administration would endorse TransCanada's plan.
"They've kept us at arm's length while doing the review," he said.
While state revenue and resource officials are reviewing TransCanada's proposal, competing oil companies ConocoPhillips Co. and BP have put forth their own application, called "Denali The Alaska Gas Pipeline."
The state's oil producers are arguing that they are better situated than TransCanada or any other independent pipeline company to build the lucrative natural gas pipeline because they hold rights to much of the North Slope's gas.
Palmer said it was unusual outside Alaska for producers to own pipelines, and his company currently transports three times the gas its proposal would ship. It owns none of it, instead shipping it for others.
"It's not the norm for producers elsewhere to own pipelines," he said.
The producers who hold gas in Alaska, including BP, ConocoPhillips and Exxon Mobil Corp., have said Alaska needs to offer them tax breaks to encourage them to develop the gas to which they hold rights. At the same time, they've suggested they wouldn't make that gas available to competing pipelines.
Palmer acknowledged that was a concern in making a $30 billion investment, but said he expected gas would be made available if a pipeline was built.
"Clearly I would have felt more comfortable in going in to see my board of directors if I had three producers who were keen to commit their gas to an independent pipeline," he said.
Palmer indicated TransCanada could play hardball as well, however.
The company has spent years developing rights of way to build a gas pipeline through Canada, the same route the BP-ConocoPhillips pipeline is proposing.
Palmer said TransCanada has an exclusive right to a pipeline through that route, but acknowledged that others dispute that. If someone else plans a pipeline, he said the company would defend those rights.
"At the end of the day, we'll have to defend our shareholders' interests," Palmer said.
TransCanada is the only company to meet the state's AGIA requirements and potentially qualify for a $500 million state subsidy. In exchange for the subsidy, AGIA's requirements mean that a TransCanada pipeline would be designed to be expanded and open to new exploration companies to use it to ship their gas to markets.
"If you put this pipeline in, you are going to induce exploration," he said.
Contact reporter Pat Forgey at email@example.com.
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