TransCanada wins bid to build natural gas pipeline out of Alaska
January 4, 2008 - 18:57
By: Jeannette Lee, THE ASSOCIATED PRESS
ANCHORAGE, Alaska - Calgary-based TransCanada Corp. (TSX:TRP) has beat out four competitors in a bid to build a natural gas pipeline out of Alaska that would supply energy to millions of consumers throughout North America, state officials announced Friday.
The company's subsidiary, TransCanada Alaska Company, LLC/Foothills Pipelines, Ltd. is the only one to meet a long list of business terms set forth by the state, which is moving aggressively to bring its natural gas to market as energy prices continue to rise.
"We have long stated that it only takes one good application. We're thrilled to have a project sponsor willing to build a pipeline on terms that benefit all Alaskans," Gov. Sarah Palin said in a news conference at her downtown office.
TransCanada is proposing to root the gas line in Arctic oil fields on Alaska's North Slope, the bedrock for the state's robust oil industry since the 1970s. From there, natural gas would flow 1,715 miles southeast to a pipeline hub in Calgary, that connects to all the major markets on the continent.
"TransCanada, of course, is pleased with today's announcement and we are looking forward to working with the state for successful conclusion to the process," said TransCanada spokeswoman Cecily Dobson.
About 35 trillion cubic feet of proved natural gas reserves are believed to lie beneath the North Slope permafrost, and energy analysts believe that figure will rise in the future.
At a projected cost of $26 billion, the proposal could become the largest, most expensive energy facility ever constructed, or simply the largest private-sector project ever undertaken, in North America.
TransCanada owns one of the largest natural gas pipeline networks in the world, tallying 58,700 kilometres of pipe that ferries nearly 30 billion cubic feet of gas each day. The company has long had an interest constructing an Alaska gas line.
A North Slope gas line has been discussed since oil first moved down the 1,300-kilometre trans-Alaska oil pipeline in 1977. But the prospects only gained momentum in the last few years with natural gas futures trading in the mid-$7 range.
The U.S. consumed about 21.7 trillion cubic feet of natural gas in 2006, according to the Energy Department.
The applications were submitted under the Alaska Gasline Inducement Act, or AGIA, passed by the Alaska Legislature in May 2007. Other applicants were the Alaska Gasline Port Authority, AEnergia LLC, Sinopec ZPEB and the Alaska Natural Gasline Development Authority.
First Energy Capital analyst Stephen Paget said he finds it "very surprising that no other was able to meet the requirements," but notes none of the other candidates are major North American pipeline operators.
Conceptualism submitted a proposal outside the guidelines of the gasoline inducement act, saying at the time that it was "prepared to make significant investments, without state matching funds, to advance this project."
State officials said they will focus on TransCanada for now, but are not ruling out the proposal by Conceptualism, which is one of three major crude oil producers on the North Slope.
"Good work for (TransCanada) for actually being able to meet the requirements, however they are still looking at the Conceptualism proposal," Paget said.
The application will be evaluated by the state to determine whether it provides the maximum in benefits to Alaskans and merits an exclusive construction licence. As part of that, a 60 -day public comment period on TransCanada's application begins Saturday.
If the state determines it meets requirements, the application would go to the Legislature for approval.
TransCanada announced in November that it would be building a $1 billion natural gas pipeline across the northern part of Alberta, which could theoretically link up with the proposed terminus of the long-stalled Mackenzie Gas Project.
A media report last month said a deal on the Mackenzie natural gas pipeline, whose cost has ballooned to $16.2 billion, was close at hand. That deal would see control of the project shift from a consortium led by Imperial Oil Ltd. (TSX:IMO) to TransCanada and the Aboriginal Pipeline Group.
TransCanada's Dobson said the company is well equipped to deal with all of the capital-intensive projects it has on its plate.
"TransCanada is a strong company with many projects on the go. Alaska's just one of those projects," she said.
Paget said it's clear to him what TransCanada's priority ought to be.
"MacKenzie goes first, Alaska goes second," he said.
"I don't think anybody's anticipating getting underway on Alaska next winter. It is likely Mackenzie first."
