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TransCanada, Denali, update legislators Denali says partnering with TransCanada ‘problematic’ because of AGIA; TransCanada says in-house expertise gives it an edge Kristen Nelson Petroleum News
It was pretty much tit for tat as Denali and TransCanada faced off in front of the Senate Resources Committee and the House Special Committee on Energy. The companies have competing proposals for a gas pipeline from the North Slope to markets in the Lower 48.
Bud Fackrell of Denali — The Alaska Gas Pipeline and Tony Palmer of TransCanada were in Juneau April 7 to update legislators on the progress of the proposals.
TransCanada is the state’s licensee under the Alaska Gasline Inducement Act and in exchange for $500 million in matching funds for specific work the company committed to meet 20 “must haves” specified by the state.
Denali is a joint venture by North Slope producers BP and ConocoPhillips.
Fackrell, Denali’s president, said Denali has the advantage of decades of Alaska and Canadian construction and operational experience, has followed the advice of the Federal Energy Regulatory Commission and pre-filed for its certificate of convenience and necessity, has established an Alaska headquarters office and is spending its own money to move the project forward.
Palmer, president of TransCanada Alaska and a TransCanada Corp. vice president, said TransCanada brings the advantage of in-house expertise: “We don’t have to build an organization from scratch.”
Palmer has frequently been asked about the number of employees the company has in Alaska and he noted that TransCanada said in its AGIA application that until the end of the open season process the company expected all of the work to be done in Calgary.
He said the company has gone beyond that and opened an Alaska headquarters; he said that between TransCanada and contractors 42 Alaskans have been employed on the project in short-term or permanent work.
FERC and the cost of regulation Gas pipelines must obtain certificates of public convenience and necessity from FERC before construction begins and pre-filing allows the regulator to hire third-party contractors to begin work.
Normally pre-filing is done after an open season, the process that ensures there are shippers willing to back a line with long-term shipping commitments. FERC wanted the companies to pre-file before the open season and Denali has complied with that request.
Fackrell was asked if it wasn’t more expensive to pre-file with FERC before an open season. He said Denali doesn’t view it that way, thinks it is important to work with regulators and believes spending money now will be beneficial.
Palmer has told legislators in the past that TransCanada is focused on cost control and believes that early pre-filing would increase regulatory costs.
Palmer said TransCanada is in discussions with FERC on the pre-file issue and hopes to have it resolved soon.
Fackrell was asked about open-access issues if the pipeline is built by Denali, whose owners BP and ConocoPhillips control the majority of known North Slope gas reserves.
He said the Alaska Natural Gas Pipeline Act of 2004 addressed the concern of Congress that explorers not be locked out of a pipeline. Congress gave FERC the authority to write the rules, Fackrell said, and suggested that legislators ask FERC to confirm that the line will be open access.
Both Denali and TransCanada will be subject to the same FERC rules on open access, he said.
The AGIA issue Asked if Denali would take advantage of TransCanada’s Canadian access and partner with the Canadian company on the project, Fackrell said Denali’s owners have said from the beginning that they would partner with anyone who could reduce risk and add value to the project.
But partnering with TransCanada is “very problematic” because TransCanada is the AGIA licensee.
He said they had a dilemma “because of the terms and conditions of AGIA.” Denali’s owners did not submit an AGIA application because they did not believe AGIA would result in a project, Fackrell said.
He said Denali doesn’t see an advantage to partnering with TransCanada because of “impediments associated with AGIA.”
First Nations Palmer was asked about suggestions that First Nations’ issues haven’t been addressed. He said TransCanada’s right of way through the Yukon was obtained in 1983 and is recognized in an agreement between the Canadian government and all of the Yukon First Nations.
The circumstances for TransCanada are very different than those faced by the Mackenzie line, which had to obtain both access and benefit agreements with First Nations, Palmer said.
TransCanada’s right of way gives the company access, he said.
Benefits are part of the Northern Pipeline Act and have been established for 30 years, Palmer said, but added that the company has sent letters to the Yukon First Nations offering to improve the benefits in exchange for participation agreements. He said several First Nations have expressed an interest and TransCanada has begun negotiations with two of them.
He said participation agreements would be positive for the project, but if those are not negotiated TransCanada will rely on legal terms and conditions established some 30 years ago.
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