Thursday, July 24, 2008

AGIA And TransCanada Starting To Look Like A Bad Deal For Alaska; TransCanada Couldn't Start Alaska Gas Pipeline Until 2015

As I learn more information about Sarah Palin's Alaska Gasline Inducement Act (AGIA), I become more skeptical about the prospects for success. On July 24th, 2008, on his radio show, KFQD's conservative shock jock Dan Fagan played an audio clip from TransCanada CEO Harold Kvisle. In this clip, Kvisle states that, before TransCanada constructs an Alaska gas pipeline, they would have to complete the following:

(1). The $5.0 billion Keystone project, Phase One.

(2). The expansion of the Keystone project.

(3). The Mackenzie Valley pipeline.

Only when those three objectives were accomplished would TransCanada start on the Alaska gas pipeline. And the earliest start date - 2015.

Yet the producers who propose the alternative Denali gas pipeline, BP and ConocoPhillips, could start IMMEDIATELY. Of course, the fact that they actually hold the leases permits an earlier start.

TransCanada, 2015. BP and ConocoPhillips, 2008. Now which of the two do YOU think better serves Alaska's interest?

The Fairbanks Daily News-Miner obviously does not believe AGIA and TransCanada best serve Alaska's interest, even though TransCanada is a reputable company. In a July 24th editorial column, they point out that TransCanada has no gas of its own. It will need the gas held under legitimate lease by BP, ConocoPhillips and ExxonMobil for its project to proceed. TransCanada needs the oil companies to commit the gas to its project so it can secure financing — no financing, no project.

In contrast, BP and ConocoPhillips have embarked on their own pipeline project and have committed to spending $600 million on preliminary work — including field work that is currently under way — during the next three years. So it is difficult to see what is gained by giving a license to TransCanada. And the state “license” isn’t even the one that matters; that one comes from the Federal Energy Regulatory Commission (FERC). BP and ConocoPhillips have already begun the process to take their North Slope project to FERC.

But the real "go-to" guy for information on this deal is Andrew Halcro. In this post on his blog, Halcro explains why a it is foolhardy for the state legislature to award a license to a company which has no access to Alaska's natural gas, and refers to an attached eight-page letter from BP to State Senator Bettye Davis in which BP explains the advantages of the Denali project and even suggests combining the Denali and TransCanada projects. In contrast, awarding the license to TransCanada, which has no current access to Alaska gas, opens up the possibility for delays in TransCanada if they cannot negotiate a deal with the Big Three producers, and exposes taxpayers to possible treble damages. Another informative source on the gas pipeline is the Alaska Gas Pipeline blog.

Unfortunately, the Alaska State House already passed HB3001, which approved awarding the state license to TransCanada by a 24-16 margin, and upheld on reconsideration (also reported by KTUU). Here's how the House members voted:

Yeas: Buch, Cissna, Coghill, Crawford, Doll, Doogan, Edgmon, Gara, Gardner, Gatto, Gruenberg, Guttenberg, Holmes, Joule, Kawasaki, Keller, Kelly, Kerttula, Lynn, Meyer, Nelson, Salmon, Seaton, Thomas

Nays: Chenault, Dahlstrom, Fairclough, Foster, Harris, Hawker, Johansen, Johnson, LeDoux, Neuman, Olson, Ramras, Roses, Samuels, Stoltze, Wilson

However, the Senate has not acted on HB3001 yet. The Senate has until August 2nd to act on it; Senate President Lyda Green expects a vote by the end of next week (around July 31st). There is time to deter the State Senate from passing this legislation. Find out how to contact your state senator HERE.

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