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Alaska governor recommends TransCanada's pipeline bid on Alaska Highway Pipeline

Alaska governor recommends TransCanada's pipeline bid
The Associated Press
May 22, 2008 at 6:39 PM EDT

JUNEAU, Alaska — — Alaska Governor Sarah Palin on Thursday recommended that state lawmakers approve a proposal from TransCanada Corp. [TRP-T] to build a natural gas pipeline from Alaska's North Slope to a hub in Alberta.

Ms. Palin, Natural Resources Commissioner Tom Irwin and Revenue Commissioner Pat Galvin said the plan by the Calgary-based company merits issuance of a license under the governor's Alaska Gasline Inducement Act, as well as a $500-million (U.S.) cash inducement from the state.

They said the $26-billion dollar project stood far above a competing proposal from oil giants BP PLC and ConocoPhillips because it was binding and enforceable.

Lawmakers have 60 days to review the license proposal. A special session begins June 3 in Juneau.
TransCanada Corp.

“This plan puts Alaskans first,” Ms. Palin said during a news conference in Anchorage.

She said the proposal from TransCanada was better than hoped for.

Thursday's announcement is “a very positive step for TransCanada, but not the final step,” Tony Palmer, vice-president of the company's Alaska operations, said in a phone interview with the Canadian Press from Anchorage.

“The next step after this recommendation is we'll have to, with the administration, convince the legislature that this is the right path forward for Alaska,” he said.

The application from TransCanada Alaska Co., LLC, and Foothills Pipelines Ltd. proposed a 4.5 billion cubic feet per day, 1.2-metre diameter pipeline running 2,760 kilometres from a gas treatment plant at Prudhoe Bay on the North slope to the Alberta hub.

TransCanada has a massive gas pipeline network in Alberta, but with Western Canadian supply declining, the company needs to seek out new frontier opportunities, such as Arctic gas.

The world's major energy companies have attempted since the 1970s to connect Alaska's vast, yet stranded, gas reserves - estimated to hold 35 trillion cubic feet - to market, but cost pressures and regulatory holdups have continually delayed the development of a pipeline.

The Alaska part of the pipeline would be about 1,207 kilometres long, and have five natural gas delivery points in the state.

Two of the world's largest oil companies unveiled plans in April to jointly develop a multibillion dollar pipeline.

Britain's BP PLC and ConocoPhillips, based in Houston, said they plan to spend $600-million in the first phase of the project over the next three years, beginning this summer. The project's cost estimates exceed $30-billion.

Ms. Palin on Thursday said no commercial terms are specified under this plan and it makes no enforceable commitments to move the project forward, making both costs and benefits to the state uncertain.

If the legislature were to grant TransCanada the license, the company then would hold an open season, or solicit firm shipping commitments for natural gas.

Ms. Palin said producers who commit to ship natural gas get reserved capacity on the pipeline and fixed tariff rates.

“We would be seeking any party that's interested in transporting either their own gas or being a purchaser of gas from Alaska to be in service in about 10 years time,” Mr. Palmer said.

After the open season, the company would apply for a federal certificate. If approved by the Federal Energy Regulatory Commission, pipeline construction could begin.

TransCanada has a number of high-cost projects under way, including the revamp of its Bruce Power nuclear plant in Ontario, its Keystone oil pipeline into the U.S. Midwest and the long-stalled and over-budget Mackenzie Gas Project, which would ship natural gas from the Northwest Territories into Alberta.

The bulk of the spending on Alaska will not happen until 2014 or 2015, so it will not interfere with the other projects on schedule to be finished years earlier, Mr. Palmer said, adding that Alaska and Mackenzie “are in no way conflicting.”

“TransCanada has been a strong supporter of Mackenzie advancing ASAP and is currently on schedule to be in service well before the Alaska project. We think both projects are needed and we're a supporter of both projects,” he said.

If, as planned, the two northern pipelines come in service two to four years apart, “there's some real potential for some cost savings on both projects,” he said.

TransCanada shares closed up 32 cents (Canadian) at $39.92 on the Toronto Stock Exchange on Thursday.


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