Putting together a deal: TransCanada
Alaska nod for TransCanada pipe
Alaska officials today formally handed TransCanada a state licence to build and operate a long-desired pipeline that would bring natural gas from the state's North Slope to North American markets.
The licence was officially granted at a Fairbanks ceremony held about four months after the state legislature passed a bill approving the TransCanada bid for the exclusive state licence to build the mega-project. TransCanada had been the choice of Governor Sarah Palin and her administration.
Palin, a Republican who has spent much of her two years in office pushing for a natural gas pipeline that would be operated independently of the three major North Slope oil producers, said the Calgary-based company is the right company for the job, a Reuters report said.
"TransCanada is North America's premier pipeline company," Palin said at the Fairbanks ceremony. "Their record of delivering projects on time and on budget is unsurpassed in the industry.
"And their commercial skill and approach to solving problems will no doubt be of value to us as we continue to take the necessary steps forward on this important project. They're not showboats. They just get the job done," Palin said.
The licence was signed by state Natural Resources Commissioner Tom Irwin and state Revenue Commissioner Pat Galvin. It was awarded jointly to TransCanada Alaska and Foothills Pipe Lines, both wholly owned TransCanada units.
The licence authorises TransCanada to receive up to $500 million in matching state funds for pipeline-preparation expenditures.
The licence also bars the state from negotiating separately with any other potential gas pipeline sponsor. But it does not preclude alternative gas pipeline proposals, such as the Denali project that has been launched by BP and ConocoPhillips, two of the three major North Slope oil producers and leaseholders.
The other major North Slope oil producer, ExxonMobil, has not committed to either the TransCanada plan or the competing Denali project.
None of the major producers submitted a bid under the Alaska Gasline Inducement Act (AGIA), the Palin-sponsored law that authorised competing bids. A spokesman for the Denali group said that project is unaffected by the TransCanada licence.
"Denali is moving forward outside of the AGIA framework, and today's event doesn't impact our work programme," said Denali spokesman Dave MacDowell.
While crude has flowed from the North Slope in the trans-Alaska pipeline since 1977, Alaska officials have sought for decades to secure a second pipeline that would allow shipments of the region's vast natural gas resources. The North Slope holds an estimated 35 trillion cubic feet of known natural gas and is believed to hold several times more that amount in undiscovered reserves.
Economic hurdles have to date kept the North Slope's natural gas stranded from markets.
TransCanada - which promoted a similar pipeline that received federal permits in the 1970s but was never built - has estimated its project will cost $26 billion. The line would run over 1700 miles (2720 kilometres) from Prudhoe Bay to an existing pipeline hub in Alberta.
Others have cited more costly price tags. In campaign stops during her unsuccessful vice presidential bid, Palin repeatedly touted the yet-to-be-built gas pipeline as a $40 billion project.
Hal Kvisle, chief executive of TransCanada, said controlling costs "is of paramount importance" to making the project a success.
TransCanada regularly builds large-diameter pipe for costs 25% to 35% lower than competing companies do, Kvisle said at the Fairbanks ceremony.
"We think it's very important that we be able to move gas from Prudhoe Bay to Alberta for less than $3 per million British thermal units. If we can keep that cost under control, then it makes sure that Alaska's gas resources are of great value to the people of Alaska and to the producers at Prudhoe Bay over the longer term."