Wednesday, March 03, 2010

TransCanada And Denali Squabble Over Alaska Natural Gas Pipeline Proposals During Calgary Meeting Of Arctic Gas Symposium

This story has not shown up in any Alaska media yet, but it is definitely pertinent to our state, so here goes. On March 2nd, 2010, the Calgary Herald reported about a squabble taking place between the AGIA consortium, consisting of TransCanada and Exxon, vs. the Denali consortium, consisting of ConocoPhillips and BP, over the proposed Alaska natural gas pipeline, now projected to cost as much as $41 billion. The dispute surfaced at the 10th Annual Arctic Gas Symposium in Calgary sponsored by the Canadian Institute.

The dispute centers over who is best suited to construct the pipeline. Bob Bleaney, Denali's Canadian manager, maintains that being outside the AGIA terms is not necessarily a disadvantage. "We think that (being outside the act) actually is a benefit for our project, because we're not tied to those particular conditions and we think we have a better opportunity to bring forward a successful project," Bleaney told the conference. He compared the state sanction of TransCanada's proposal to granting a driver's licence.

Immediately, Tony Palmer, TransCanada's vice-president responsible for Alaskan development, fired back, saying that TransCanada has been working to develop the project for more than 30 years and insisted that no pipeline will be built without the support of local and state governments, along with the main shippers. Working under the inducement-act process is the best way to move the project forward. "I would suggest it's (inducement act support) a little more than that (a driver's licence)," Palmer retorted. "No project goes forward in the pipeline business without three things in need an economic project, secondly, you need customers and, thirdly, you need to have regulatory approvals to build your pipeline. No commercial party can deliver this project alone."

Palmer also explained that more than three decades of development work give TransCanada a competitive advantage in building and operating the line over its rivals. It already owns much of the right-of-way and in 1977 the Canadian and U.S. governments signed a transit treaty that formed the basis of the Northern Pipeline Act and granted TransCanada subsidiary Foothills Pipe Lines the right to operate the line.

On January 29th, TransCanada launched its own open season to solicit potential customers, which will begin June 29th. When it closes 90 days later, Palmer suggested the question of who will build the line will be answered. Denali will launch its own open season later this year, most likely in July. For those who don't fully understand what an "open season" is, a January 13th Alaska Dispatch article provides a tutorial.

In short, the open season is a 90-day period governed by the Federal Energy Regulatory Commission (FERC), buffered on the front end with another 90 days of public comments and notices. A company wanting to build a pipeline -- called "the sponsor" -- lays out its plans, such as how much it will charge to move gas. In response, shippers make bids reserving space in the line by promising a long-term financial commitment to the project. Shippers can be anyone from producers with gas to sell at market to utilities needing supplies. A company serious about launching construction within a couple of years is going to want solid, binding bids from an anchor customer and several others. The lack of such bids could place a construction project on hold, or derail it altogether.

And bidders have both Denali and TransCanada to choose from. Will either one, or both, get enough bids to proceed to the next phase? TransCanada would seem to have the edge because of official state support.

No comments:

Post a Comment