Saturday, October 25, 2008

How Alaska Governor Sarah Palin Deliberately Channeled $500 Million And A Natural Gas Pipeline State License To TransCanada

Finally, the national media stopped obsessing with irrelevancies about how much was spent recently on Sarah Palin's traveling wardrobe and published a story which gets right to the heart of Sarah Palin's suitability to be a heartbeart away from the Presidency. The Alaska Gasline Inducement Act (AGIA) was never intended to be an open, transparent process.

The Associated Press has published a major expose on how Sarah Palin deliberately froze out the three major North Slope producers - ConocoPhillips, British Petroleum, and ExxonMobil, used AGIA to create an illusionary appearance of "competition", and steered the contract to the company she wanted - TransCanada. This despite the fact that TransCanada owned NO natural gas leases, and would have to go through the Big Three to get access to the natural gas anyway. Furthermore, the CEO of TransCanada, Hal Kvisle, was captured on tape stating that construction couldn't even begin until 2015 at the earliest, AFTER they had completed their pending Canadian projects.

The full story is posted on the Fairbanks Daily News-Miner website. Other coverage provided by the Winnipeg Free Press. Also read this post on the AlaskaGasPipeline blog. Here are the major findings:

— Instead of creating a process that would attract many potential builders, Palin slanted the terms away from an important group — the global energy giants that own the rights to the gas.

— Despite promises and legal guidance not to talk directly with potential bidders, Palin had meetings or phone calls with nearly every major candidate, including TransCanada.

— The leader of Palin’s pipeline team [Marty Rutherford] had been a partner at a lobbying firm where she worked on behalf of a TransCanada subsidiary. Also, that woman’s former business partner at the lobbying firm was TransCanada’s lead private lobbyist on the pipeline deal, interacting with legislators in the weeks before the vote to grant TransCanada the contract. Plus, a former TransCanada executive served as an outside consultant to Palin’s pipeline team.

— Under a different set of rules four years earlier, TransCanada had offered to build the pipeline without a state subsidy; under Palin, the company could receive a maximum $500 million.

The most troubling question has been why Sarah Palin froze out the Big Three producers. According to the article, Palin saw problems if the firms that own the gas also owned the pipeline. They could manipulate the market or charge prohibitive fees to smaller exploration firms, discouraging competition.

The Big Three were not unwilling to compete. They just didn't want to assume all the risk without the expectation of a fair return. In fact, ConocoPhillips and BP have launched a competing project completely outside the state’s process, known as Denali-The Alaska Gas Pipeline, that promises to get the job done more quickly.

The McCain-Palin campaign wasted little time scrambling into damage control mode. “Governor Palin held firmly to her fundamental belief that Alaska could best serve Alaskans and the nation’s interests by pursuing a competitive approach to building a natural gas pipeline,” said McCain-Palin spokesman Taylor Griffin. “There was an open and transparent process that subjected the decision to extensive public scrutiny and due diligence.”

The News-Miner article provides some more analysis. Even though TransCanada has been awarded a state license, their pipeline is still a pipe dream at this point. First, they need approval from the Federal Energy Regulatory Commission, which is years away. In addition, they also need Canadian regulators to sign off on their portion. Furthermore, First Nation tribes in Canada are objecting to the proposed route.

And even if it successfully negotiates financial and regulatory hurdles, TransCanada still has no obligation to build the pipeline. If the company doesn’t complete the project, it could still receive up to $500 million in state subsidies, with startup costs split evenly until the company tries to secure contracts to ship gas through the supply channel. Between the time TransCanada locks in shipping commitments and files for a federal permit, the state will pick up 90 percent of the tab even before ground is broken.

If TransCanada can’t woo the energy companies to use its pipeline, banks won’t finance the project. And unless the state or TransCanada decide to break the contract, the company must move forward with the federal permitting process for a project that would be all but doomed. The state treasury would cover most of those costs.

According to a new report by the Congressional Research Service, TransCanada and state officials may be underestimating how long the project will take; the target finish date is 2018.

Should TransCanada win federal permission to start digging, U.S. taxpayers could be on the hook, big time. Included in the company’s bid is a proposal for the federal government to absorb up to $75 billion in liability over a 25-year period if the major natural gas suppliers refuse to ship their gas through the line, the CRS report said. Such a measure would require congressional approval.

$500 million for a prospective pipe dream. Now you understand why economic conservatives like the Voice Of The Times, Andrew Halcro, and Dan Fagan have been just as bitterly critical of Palin as the Obamaholics. Both Troopergate and AGIA paint a portrait of a governor who's determined to get her way, even if she has to bend the rules. And she's been absolutely unrepentant about Troopergate.

That's almost as scary as having Barack Obama in the White House. But too scary to allow me to vote for McCain.

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