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NEWS BULLETIN

January 29, 2010 --- Vol. 16, No. 10January 2010

Alaska Pipeline Project files for open season

The TransCanada-ExxonMobil Alaska Pipeline Project has filed its open season plan with the Federal Energy Regulatory Commission, the companies said today.

The plan covers the two options that were part of TransCanada’s Alaska Gasline Inducement Act application: A line from the North Slope to the Alberta hub and a line from the North Slope to Valdez. Both options include access to North Slope gas for Alaskans, a gas treatment plant and a pipeline from the Point Thomson field.

Cost estimates are $32 billion to $41 billion for the Alberta project and $20 billion to $26 billion for the Valdez option, not including liquefaction facilities or ships, which would be the responsibility of the shippers.

The companies said better commercial terms are projected to save shippers $500 million a year in tariffs. The proposed terms include a reduction in return on equity to the pipeline from 14 percent to 12 percent and recovery of only 80 percent of capital costs over the duration of the transportation contract, which could be as short as 20 years.

The first-gas date is set at 2020, which is later than TransCanada originally proposed, but Alaska’s commissioners of Revenue and Natural Resources said in a statement that the updates to the project cost and schedule “are in line with the analysis done by the AGIA technical team as part of the AGIA license review,” and validate the economic analysis the commissioners relief on in the AGIA findings.

The filing is available on the project’s Web site, www.thealaskapipelineproject.com.

RCA declines to rule on regulation of CINGS gas storage

The Regulatory Commission of Alaska yesterday issued an order declining to rule that the commission would not regulate a natural gas storage facility that Cook Inlet Natural Gas Storage LLC plans to build in the Cannery Loop gas field on Alaska’s Kenai Peninsula. The order leaves open the question of whether or not RCA would ultimately regulate the facility.

Faced with the likelihood of gas deliverability shortfalls in the winter of 2011-12 unless more gas storage comes into operation in the Cook Inlet basin, gas utility Enstar Natural Gas Co. has been working with CINGS, a subsidiary of pipeline company TransCanada, to fast track the construction of a storage facility that would be available for use by utilities or gas producers that need to store summer-produced gas for use during peak winter demand.

Worried about the potential impact of regulatory uncertainty on the economics of the gas storage project, CINGS had petitioned the commission to rule not to regulate the facility, and had requested a rapid decision on the ruling, well before construction of the facility is scheduled to begin.

But in yesterday’s order, RCA said that the commission does not have the authority to rule on the legal question of the scope of its jurisdiction over gas storage, and that any ruling on this matter by the commission “will ultimately be given no weight.” Consequently, a ruling by the commission would not remove the regulatory uncertainty regarding the storage facility.

The Alaska Supreme Court has ultimate authority in interpreting the statutes governing RCA jurisdiction, but “the most expeditious way to clarify our jurisdiction is through amendment to our statutes, explicitly authorizing us to regulate natural gas storage or exempting natural gas storage from our regulation,” RCA said.

See stories in Feb. issue, available online at noon, Friday, Feb. 5 at www.PetroleumNews.com

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