Palin forwards pipeline plan to Legislature

Posted: Friday, May 23, 2008

Gov. Sarah Palin on Thursday announced that TransCanada Corp.'s plan to build a North Slope natural gas pipeline would be forwarded to the Alaska Legislature for approval.

Palin's Alaska Gasline Inducement Act, which passed overwhelmingly by the Legislature last year, produced five applicants to build a pipeline, but only TransCanada met all the law's requirements.

In the months since it was submitted, Commissioner of Revenue Pat Galvin and Commissioner of Natural Resources Tom Irwin reviewed the Alberta, Canada, company's proposal and determined that it was a good deal for Alaska, Palin said.

"It's a better proposal than we'd even hoped for," she said.

AGIA was designed to spur construction of an Alaska gas pipeline that the state had been waiting decades for. Former Gov. Frank Murkowski offered billions in tax incentives to the oil companies holding rights to North Slope gas hoping to win a pipeline, but the Legislature failed to approve his plan.

TransCanada's vice president for Alaska development, Tony Palmer, appeared with Palin at the announcement, calling it a "gratifying moment for us."

House Democratic Leader Rep. Beth Kerttula of Juneau called sending the TransCanada proposal to the Legislature "a good first step."

Sen. Kim Elton, D-Juneau, said he still needs to know more details, but is supportive of Palin's AGIA process.

"It's only because of AGIA that ConocoPhillips and BP have proposed their alternative," he said.

The commissioners' review took longer than expected, as they looked not only at proposals that were submitted, but some that weren't.

Those included a competing proposal by ConocoPhillips and BP for an overland pipeline to Alberta, Canada, similar to TransCanada's, but also a line parallel to the trans-Alaska oil pipeline that would lead to a liquefied natural gas export terminal in Valdez.

Many Alaskans, including House Speaker John Harris, R-Valdez, former Gov. Wally Hickel, and Palin herself as a candidate, said they preferred an "all-Alaska" route to Valdez.

Palin said she was willing to take as long as it required to study the other proposals, but the review made it clear which way to go.

"LNG still has many, many challenges compared to an overland route," she said.

The Alaska Gasline Port Authority, which has been trying to build an in-state gas pipeline, was disappointed that an LNG proposal had been discounted, said Bert Cottle, chairman of the authority's board and mayor of Valdez.

He listened to the teleconference of the governor's announcement, but was waiting to see the specifics of her analysis before commenting further.

"I can tell you right now, we're not going to go away," Cottle said.

Rep. Harry Crawford, D-Anchorage, has supported a pipeline to Valdez, but said the TransCanada plan would be good for the state.

"For those of us who would like to see an all-Alaska line, this is a good step in the right direction," he said. "It gets a tap into Prudhoe Bay."

Kerttula said a TransCanada pipeline benefits from not being controlled by ConocoPhillips, BP or Exxon Mobil, the state's big three oil producers who hold leases to much of the North Slope's gas reserves.

"I start from a position of not wanting a producer-owned pipeline," Kerttula said.

The producer-owned trans-Alaska pipeline has allowed them to control oil development in the state, to Alaska's detriment, she said.

"Having been a TAPS tariff lawyer, I can see what that does for us, and it hasn't always been good," she said. Previously Kerttula worked for the Alaska Department of Law's Oil and Gas Section.

A pipeline controlled by producers may be able to exclude others, giving the producers a competitive advantage and hurting the state's interests.

Palmer said a TransCanada-owned pipeline would encourage more exploration, providing more economic benefit to the state than a producer pipeline.

"That's where the long-run employment comes from," he said.

With BP and ConocoPhillips promoting their own pipeline proposal called "Denali-The Alaska Gas Pipeline," it is not clear where TransCanada will get commitments of gas in as process called an "open season" in a few years.

Palin said there was no reason to believe that the companies would withhold their gas from a TransCanada pipeline.

"It would provide them with enormous profits," she said.

There may be litigation if the producers failed to offer their gas during the open season, but she said she wasn't anticipating that now.

We want to keep that "in our back pocket" for now, she said.

Crawford said the producers are fighting a competing pipeline now, but they'll want to profit from their gas.

"They want control," he said. "Once they lose control, they're going to fight for market share."

Galvin said if TransCanada wins legislative approval, gas shipments would begin in 2017 to 2020.

The special session to consider TransCanada's plan begins June 3.

• Contact reporter Pat Forgey at 523-2250 or patrick.forgey@juneauempire.com.



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