August 18, 2008

TransCanada wins licence to start construction of $26-billion Alaska pipeline

RICHARD GILBERT

staff writer

Lawmakers in Alaska have awarded a licence to Calgary-based TransCanada Corporation to start building the US$26-billion Alaska Pipeline Project.

The company announced on Aug. 1 that it has received the support of the Alaska Legislature to move forward.

On the same day, the Alaska Legislature signed off on House Bill 3001, which authorizes the government to award the Alaska Gasline Inducement Act (AGIA) licence to TransCanada Alaska.

“This is a historic day in Alaska,” Governor Sarah Palin said.

“Today, with the affirmative vote of both chambers of the Alaska State Legislature, we now begin a lifelong partnership with a company that has shown its true commitment to Alaska’s future.”

The approval of the licence by Alaska’s state senate follows approval by the state’s House of Representatives.

The House voted in favour of a bill backed by Governor Palin, that would grant TransCanada a state licence.

The licence allows TransCanada to develop and build a 48-inch diameter, mostly buried pipeline, which will move natural gas 2,700 km from Prudhoe Bay in northern Alaska through northern B.C. to link with the pipeline grid in northwestern Alberta.

Integration of the pipeline with TransCanada’s Alberta System will provide access to markets across the U.S.

“The legislature’s decision represents a significant milestone in advancing this major natural gas pipeline project to connect stranded U.S. natural gas reserves to Alaskan and Lower 48 consumers,” said Hal Kvisle, TransCanada’s president and CEO.

“This ratification of our licence under AGIA will facilitate TransCanada’s continuing commercial negotiations with potential shippers, improving the likelihood of a successful open season and the construction of a natural gas delivery system from Prudhoe Bay to Lower 48 markets.”

A state licence will provide a streamlined permitting process and state funding of up to US$500 million for TransCanada spending on preconstruction costs.

TransCanada will move forward with project development, which includes engineering, environmental reviews, aboriginal relations and commercial work to conclude an initial binding open season by July 2010.

During this period, TransCanada will continue its efforts to align with potential shippers.

If sufficient firm contracts are secured in the open season, TransCanada would begin construction after U.S. federal regulatory approvals are received.

The company is targeting to have the pipeline in service by September 2018.

Palin, who is a Republican, endorsed TransCanada’s plan because an independent pipeline operator would free the state and the North Slope from the dominance of major oil producers, in particular BP, ConocoPhillips and Exxon Mobil.

Representative Harry Crawford, an Anchorage Democrat, said he was impressed with TransCanada’s enthusiastic embrace of the project, in contrast with what he said was the pessimistic attitude of the major oil producers.

“When the producers would come in, they’d talk about how big the project was, how difficult it was going to be, how hard it was to get the financing and all the reasons why it was going to be so, so hard to get this pipeline built,” Crawford said.

“I never heard any enthusiasm from them. But when we heard from TransCanada, what we heard was this project is integral to their future. This project is integral to Alaska’s future.”

Lawmakers who voted against the licence said they had more faith in a competing proposal by BP and ConocoPhillips.

This joint project, named Denali, would follow a similar route to the proposed TransCanada pipeline.

However, Denali has not been endorsed by the Alaska government and would not receive government funding. Opponents of House Bill 3001 criticized the US$500-million funding package as a state subsidy for TransCanada.

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