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One more Alaska natural gas line plan TransCanada submits application to state, says 2012 start-up possible Larry Persily Petroleum News Government Affairs Editor
Assuming everyone involved in the proposed Alaska natural gas line project can strike a deal to divvy up the financial risks, and assuming no permitting delays or other political or regulatory problems, TransCanada Corp. said it believes it could help build the pipeline and have gas flowing by 2012.
The Calgary-based pipeline operator submitted an application June 1 under Alaska’s Stranded Gas Development Act, the fifth such application the state has received since late January to negotiate a long-term fiscal deal for payments in lieu of all state and municipal taxes on the proposed pipeline.
“This project is complex and entails significant risk. Its success — and similarly the future well-being of the Alaska economy — will depend upon the goodwill and cooperation of many stakeholders,” the company said in its application.
TransCanada has said it does not want to own the gas or take the risk of future commodity prices but it does want to hold an interest in the pipe and perhaps share the equity with others, including possibly Alaska Native corporations. “The nature and size of that interest will be determined later as the commercial structure of the proposed pipeline project becomes better defined,” it said.
The company proposes a 48-inch-diameter line from the North Slope to Boundary Lake in northern Alberta, carrying 4.5 billion cubic feet per day, feeding into existing pipeline systems for distribution across North America. That equals almost $6 billion worth of gas a year, at $3.50 per thousand cubic feet, with transportation charges expected to consume more than half of that amount.
Construction of the 745 miles of pipe in Alaska is estimated at $6.8 billion in 2004 dollars. TransCanada did not provide an estimate for the almost 1,000 miles of pipe in Canada or the extensions required for its existing pipeline system. The estimate also does not include the $3 billion or so that North Slope producers would need to spend on a conditioning plant on the slope to remove carbon dioxide, water and other impurities before putting the gas into the line. 2012 start-up contingent on shipping contracts The 2012 start-up date is contingent on getting contracts with shippers in 2005 and starting construction in late 2009, TransCanada said. Ship-or-pay contracts could provide the financial security needed to borrow money for construction.
TransCanada believes a 1977 U.S. regulatory certificate and 1978 Canadian certificate to build an Alaska gas line give it exclusive rights to the project, saving two years of permitting work that would confront any other project developer. The company also holds right-of-way permits for much of the route, left over from unsuccessful development efforts in the 1970s and 1980s.
Other gas line hopefuls, however, dispute TransCanada’s exclusive rights to any gas line development, and it’s likely the issue will need to be resolved as the company, North Slope producers, U.S. and Canadian agencies and others try to put together a team to build the line.
The certificates are held by TransCanada’s wholly owned subsidiaries Foothills Pipe Lines Ltd. and Alaskan Northwest Natural Gas Transportation Co., which was formed in 1978 to build the line from Prudhoe Bay to the Alaska-Yukon Territory border.
Regardless of the regulatory dispute, TransCanada’s far-reaching pipeline network offers strong opportunities to move Alaska gas from the end of any new pipe in Alberta. TransCanada offers access to several markets “TransCanada’s network of pipeline assets provides Alaskan gas with unparalleled access to growing markets across the continent,” the application said. “The Pacific Northwest and California; the U.S. Midwest, including the Chicago hub; eastern Canada; and the U.S. Northeast, including New England and New York City.”
TransCanada’s proposal is similar to its Calgary colleague Enbridge Inc., which submitted its application to the state April 30 and also touted its ability to use existing lines to move Alaska gas out of Alberta to Midwest markets. Enbridge, however, proposed using 36-inch pipe to reduce the risks of construction cost overruns and possibly delivering too much gas to market too quickly. If the market could handle more gas, the company would run a second line, with each carrying 2.6 bcf per day.
In addition to Enbridge and TransCanada, the state has received a Stranded Gas Act application from the three major North Slope producers.
It also received an application in January from MidAmerican Energy Holdings Co., which later withdrew its application after negotiations with the state broke down, and from the municipally owned Alaska Gasline Port Authority, which withdrew its application last month after electing to sign an information-sharing protocol with the state instead of negotiating a fiscal contract.
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