Senate gives Palin pipeline victory

TransCanada plan wins final approval from Legislature

Posted: Sunday, August 03, 2008

The Alaska Senate on Friday joined the House of Representatives' action the previous week in giving Republican Gov. Sarah Palin a victory in her quest to bring the North Slope's vast natural gas reserves to market.

Michael Penn / Juneau Empire
Michael Penn / Juneau Empire

Among the opponents of Palin's plan were Alaska's most important companies, the state's oil producers, along with top legislative leaders who are members of her own party.

The Senate voted 14-5 to approve a natural gas pipeline deal with TransCanada Corp., joining with an earlier 24-16 approval by the House.

"We think this is a significant milestone day for Alaska, and it is certainly that for TransCanada," said Tony Palmer, TransCanada's vice president for Alaska development.

The Calgary, Alberta-based company will start work almost immediately with the process of getting a pipeline certificate from the U.S. Federal Energy Regulatory Commission, he said. There may be time yet to get some field work done this summer, Palmer said.

The votes came despite the opposition of Senate President Lyda Green, R-Wasilla, and House Speaker John Harris, R-Valdez. They appointed TransCanada opponent Sen. Charlie Huggins, R-Wasilla, to chair a committee reviewing the company's application for a license under the Alaska Gasline Inducement Act.

The process appeared to be tilted against TransCanada, with mostly outspoken opponents chairing the meetings in which the license was considered.

In both bodies, Democrats eventually voted almost unanimously to support Palin's pipeline efforts, while Republicans were split.

After Friday's Senate vote, House Speaker Beth Kerttula, D-Juneau, was jubilant.

"Yeah! This is a great day for Alaska," she said.

"We've got a real-life pipeline company that has stepped up to the plate," Kerttula said.

The support for the deal came despite strenuous opposition from the state's major oil producers, including Exxon Mobil, BP and ConocoPhillips, which also hold leases giving them rights to much of the North Slope's confirmed natural gas reserves.

Exxon Mobil told legislators that developing its Alaska gas was not economic, but that position was undercut when ConocoPhillips, and then BP, said that it was profitable, and proposed their own pipeline.

The BP and ConocoPhillips pipeline, called Denali, was proposed after the Alaska Gasline Inducement Act process began. Sen. Kim Elton, D-Juneau, said that was probably done to give the Legislature an option to reject TransCanada and still get a pipeline, but instead it had another effect.

"The holders of a major portion of the gas on the North Slope have endorsed the fact that the economics are there for the pipeline," Elton said.

The AGIA process has left the state in a far better position than it was just two years ago, when it was offering billions in tax breaks to encourage a pipeline, and still not getting one.

"It's probably important to recognize where we were a couple of years ago when we had no pipelines, and we no have two," he said.

Sen. Donny Olson, D-Nome, said the state couldn't reject the AGIA process and TransCanada without handing power back to the producers.

"We'll be back at the mercy of the people who held the gas for 30 years," he said.

At a celebratory press conference afterward, Palin praised lawmakers, but also worked to rein in expectations.

"This is one of the steps," Palin said. "It's not a done deal, we're not turning dirt yet."

Commissioner of Natural Resources Tom Irwin, one of the driving forces behind the pipeline deal, said there was still a great deal of work to do on a multibillion dollar, 1,750-mile pipeline that was still a dozen years away.

The license for TransCanada approved by the Legislature doesn't obligate the company to build a pipeline, but to work toward getting a FERC certification to allow a pipeline to be built.

"We're going to work harder on this next step than we did to get here," Irwin said.

As part of the exclusive license the Legislature approved for TransCanada, the company pledged to move forward in getting the certificate, with financial assistance from the state.

Senate AGIA opponents warned that linking the state to TransCanada's plan was too risky.

"I'm looking out for the citizens who sent me here, and I'm voting no," said Sen. Bert Stedman, R-Sitka.

The Senate rejected three amendments to the AGIA license, all of which pipeline supporters said would result in rejection of the license.

Sen. Lesil McGuire, R-Anchorage, warned that an old deal in which a TransCanada subsidiary had been involved could bring as much as $37 billion in liability on the company, and Alaska as well.

She demanded language be included requiring TransCanada to indemnify Alaska, but Sen. Bill Wielechowski, D-Anchorage, said adding new requirements to the indemnification already in the license would "tank" the AGIA process on which the state has spent nearly two years.

"We've got an indemnification clause right in the license," he said.

Huggins said he didn't like the project going through Canada, a foreign country.

"This is the largest public project in the history of our country, and we're fixing to outsource it," he said.

Few other legislators appeared to fear a relationship with Canada, however, and others noted Palmer's uncanny resemblance to the upstanding Dudley Do-Right, the Canadian cartoon mountie.

McGuire also raised concerns about the treble damages provision if Alaska backs out of the deal or provides financial incentives to a competing pipeline. She said that would prevent the state from participating if some novel or innovative deal arose in the future.

Stedman said, "We become immobile in a very dynamic marketplace."

All the amendment attempts in the Senate were soundly rejected.

The Legislature approved the license, but rejected an attempt to let it take effect immediately. It will now take effect after the standard 90 days.

Galvin said that could have allowed TransCanada to back out of the license, but the company had committed to keeping the application open.

State and company officials are exploring whether that might delay reimbursement, but Palmer said he did not expect that to be a problem.

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