Alaska editorial: A work in progress

Posted: Thursday, August 05, 2010

The following editorial first appeared in the Anchorage Daily News:

Alaskans don't know the conditions - or what players are seeking what conditions - but TransCanada's announcement that there are multiple bidders interested in shipping gas down a pipeline from the North Slope is good news.

We just don't know how good, or if it's good enough, and we likely won't for months.

We do know that this news is much better than if TransCanada's open season had elicited no bids at all.

Confidentiality agreements in the Alaska Gasline Inducement Act (AGIA) of 2007 are keeping the wraps on almost all bid information. Tony Palmer, TransCanada's vice president for Alaska, stuck to a tight script in his July 30 announcement in Anchorage. He did say the bidders included major companies - presumably the North Slope producers - and others willing to commit to shipping gas through a pipeline estimated to cost as much as $41 billion.

We don't know how the bids affect the choice between a line to Alberta in Canada, or an all-Alaska line to Valdez. We don't know what conditions TransCanada and partner Exxon Mobil will be negotiating with bidders. And we don't know what conditions the bidders want from the state, which will require separate negotiations. We know in general terms - shippers will want to pay as little as possible to ship their gas, and they'll want to negotiate favorable fiscal terms with the state - but we don't know any details, where both the devil and deal will be found.

What we do know is that AGIA remains alive and well for now despite predictions of its demise, that a federal loan guarantee of $18 billion remains in place for a project, that a boost in that guarantee to $30 billion is possible, that we will still have the competing Denali project's gas line open season under way.

Palmer pointed out that in his experience, the major oil and gas companies don't waste time. And he said they've invested plenty of time and talent in assessing TransCanada's project in building their bids. That's a good sign.

Alaskans of a certain age and time in state may not be willing to bet their PFDs on a North Slope gas line. Potential projects have come and gone since the 1970s. That's because some fundamentals haven't changed. To build a gas line from the North Slope is complicated, expensive, full of risk and subject to a long list of variables, including the simple fact that oil production has been the priority for the producers.

TransCanada's announcement means there's a project to negotiate, but no obligation on anyone's part to actually build a gas pipeline yet. Pursue the project? Yes, TransCanada is obligated to the state to do that in return for up to $500 million in preconstruction costs.

On Friday, Alaska and TransCanada made progress. It looks like we're closer to a gas line, but we don't know how much closer.

Gas line bids are encouraging, but there's a long way to go.



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