|
TransCanada a go AGIA application goes to Legislature; LNG doesn’t provide same benefits Kristen Nelson Petroleum News
The administration said May 22 that TransCanada’s AGIA application to build a gas pipeline from the North Slope to market maximizes benefits to Alaskans and is recommending that the Alaska Legislature approve issuance of a license.
With that announcement, what has been a six-month closed door analysis under the Alaska Gasline Inducement Act moves into the public arena. A three-day forum on the decision and findings by the commissioners of Natural Resources and Revenue is scheduled for Anchorage May 28-30. The Legislature goes into special session in Juneau June 3 to consider the license — it must approve granting the license. Legislative leaders said May 22 that the session will begin with two days of briefings from legislative consultants, followed by five days of briefings from TransCanada and the administration. In addition to the briefings in Juneau, legislative committees will hold a series of statewide hearings, beginning June 12 with three days in Fairbanks, followed June 15 with five days in Anchorage and one day each in Mat-Su (June 24), Kenai (June 26) and Barrow (June 30). A hearing in Ketchikan will be added early in July.
Palin: Plan fulfills the dream “After decades of Alaskans dreaming about a pipeline that would transport Alaska’s natural gas into really hungry markets, this administration has a plan in hand that will move Alaska’s gas pipeline project forward, and quickly, and it is time,” Alaska Gov. Sarah Palin, flanked by DNR Commissioner Tom Irwin, Revenue Commissioner Patrick Galvin and Deputy DNR Commissioner Marty Rutherford, the gas line team leader, told a packed press conference May 22.
The governor said the plan will “bring natural gas from the North Slope to our homes, to our businesses, to our fellow Americans in the Lower 48” and “puts Alaskans first.”
AGIA, passed by the Legislature 59-1 last May, provides financial — up to $500 million in state reimbursement — and other incentives for commitment to a gas pipeline project which meets 20 state “must haves.”
An executive summary of the written findings by the commissioners was available; the entire findings, described by the governor as “over 2,000 pages of well-thought-out detail,” was scheduled to be posted on the AGIA Web site over the Memorial Day weekend ( HYPERLINK "http://www.gov.state.ak.us/agia/" www.gov.state.ak.us/agia/).
LNG won’t fly on its own While the news was good for TransCanada, it wasn’t good for proponents of a liquefied natural gas project, whom the governor credited with spurring a gas pipeline forward and “reminding Alaskans who owns these resources and what our constitution says about ownership. They get the credit for bringing the gas line this far.”
Palin said there is enough natural gas in the state for both the TransCanada project (an overland route into Canada, taking natural gas to Lower 48 markets) and LNG, but the analysis of LNG projects the gas line team did showed “LNG still has many, many challenges when compared to an overland route,” which is both quicker and more economic.
Galvin said what came out in the analysis of the highway route vs. LNG “was extremely revealing and new.” LNG projects do not provide the same reward to the state as the TransCanada project, Galvin said. Provided with expert information on LNG projects, the state found that they are complex and difficult to put together, with a “number of hurdles that are inherently in place for any LNG project to succeed.”
Even if an LNG project had matched the economics of TransCanada, “the likelihood of success of the LNG project would have left it behind the TransCanada proposal,” Galvin said.
In both economics and likelihood of success, the TransCanada project was superior to LNG, he said.
LNG not dead LNG “is not dead, not by any stretch of the imagination,” Palin said. It will work in conjunction with TransCanada, and approving the TransCanada proposal “is actually the best way to keep LNG alive,” because if demand is high enough, TransCanada will ship gas for an LNG project, down a Y-line to Prince William Sound, she said.
The executive summary says TransCanada would not preclude an LNG project, but would “enhance the prospects for a successful ‘Y line’ LNG project as it will reduce the costs, financing challenges and commercial coordination challenges unique to LNG projects.”
Irwin: analysis thorough Irwin, fired by the previous administration after he disagreed with the negotiation process under the Stranded Gas Development Act, earlier legislation to encourage a gas pipeline, said the gas team spent endless hours on the analysis, and did it right.
“We didn’t approach it with any preconceived ideas,” he said. “We have done our homework,” and that information will be shared with Alaskans and with the Legislature. “The reasons (behind the decision) are defensible,” Irwin said.
After “untold hours” of reading and studying reports and listening to presentations, “I unequivocally, wholeheartedly, technically support this decision: It’s the right thing for the State of Alaska,” Irwin said.
As for the North Slope producers, Irwin said “we know these companies are a critical part of the state; we want them to do well; we want the state to do well. Sometimes we agree on these business issues and sometimes we’re in conflict: It doesn’t mean we’re enemies — these are business issues.”
The $500 million AGIA provides up to $500 million in reimbursement for the licensee’s work.
Galvin called it “a prudent investment for the state, with the potential return of billions and billions of dollars.”
He said if TransCanada’s proposal was rejected in favor of the producers’ proposal the state would lose the guarantees provided in AGIA that the project would move forward, that the state would get the value-added provisions it has under AGIA, that there would be open-access to the pipeline and low tariffs.
The governor called it a “wise investment considering what we’re going to get in return … timelines, expandability and low transportation rates … more exploration and development, more jobs, more energy and more value,” benefits to Alaskans which “more than offsets” the $500 million.
The executive summary said under the SGDA negotiations the North Slope producers “demanded the state provide billions of dollars in fiscal concessions — far more than the $500 million provided under AGIA,” and also “demanded numerous other concessions which would have required the state to relinquish a large portion of its sovereignty. There is no reason to expect BP and ConocoPhillips would not demand similar concessions if the state rejects” TransCanada’s AGIA application.
Palin said much the same thing: “If we lose focus on what TC Alaska commits to, we risk returning to a situation where Alaska was highly leveraged by a consortium of companies holding all the cards. Never has it been more important to keep our bearing than right now.”
Are incentives needed? On the issue of incentives, Rutherford said “AGIA already has upstream incentives” that are valuable to the producers, incentives associated with royalty terms and the state’s ability to switch between taking its gas in-kind (the state would sell the gas) vs. in-value (the producer sells the gas and the state receives money) and the commitment on the state’s part not to change fiscal terms on gas production tax for 10 years for producers committing gas in an initial open season.
She said if the state is going to provide value — “move values from our side of the ledger to their side of the ledger, what we need in return is protection on open access.” She said there are values already in the law “and if at the end of the day people believe that something additional is necessary then certainly the administration and the Legislature will have that discussion. But we need to protect our interests in doing so.”
The basin opening opportunity Tony Palmer, TransCanada Corp. vice president of Alaska development, said TransCanada has a 50-year record of successful basin development. Two years before the company’s first pipeline went into service there were 180 gas wells completed in western Canada. Today, between 13,000 and 16,000 gas wells are completed each year in western Canada, Palmer said.
Creating a grid of gas pipelines across the state and promoting expansions “is where the long-run employment, in-state access and revenue opportunities come for Alaska — not just in moving your initial 35 or so proven tcf of gas,” he said.
“We clearly expect that with a project in service there will be significant new gas developed in this basin, as there has been in every other basin across North America once people know there’s going to be a pipe in the ground.”
Within 10 years of TransCanada’s initial pipeline going in, proven reserves in western Canada had quadrupled, Palmer said. He said he didn’t know the geology of the basin on the North Slope, “but we do think it’s a very prolific basin and can also see significant development once in service.”
|
