March 9, 2010

Denali pipeline should proceed without Alaska government help, proponents say

CALGARY

An official working on Alaska’s proposed $30-billion Denali pipeline said there are benefits to moving the project ahead without help from the Alaskan government, which its competitors have secured.

BP and ConocoPhillips are working together on Denali, which would transport four billion cubic feet of natural gas from Alaska’s North Slope to southern markets. That amount would represent up to eight per cent of daily U.S. natural gas consumption.

Calgary-based TransCanada Corp. and ExxonMobil Corp. have proposed a competing pipeline that could cost as much as $41 billion and has the support of the state through the Alaska Gas Inducement Act (AGIA). The act, introduced in 2007 by then-governor Sarah Palin, is designed to advance the construction of a natural gas pipeline from the North Slope to sell to southern markets.

Bob Bleaney, general manager of Denali Canada, told the Canadian Institute’s Arctic Gas Symposium last week that no proponent has an exclusive right to build pipelines in the United States or Canada.

The green light granted to TransCanada under the gas act in early 2008 was not in itself a license to build a pipeline, but it does come with the incentive of up to $500 million in state funding. But Bleaney noted that funding comes with strings attached.

Bleaney said proceeding outside of AGIA is beneficial because project developers are not tied to particular conditions. Bleaney said he thinks BP and ConocoPhillips have a better opportunity to bring forward a successful project without state support.

Both groups are getting ready to hold open seasons, which are essentially invitations for shippers to participate in their projects. TransCanada and ExxonMobil will hold its open season between May and July, and Denali will go through that process between July and October.

BP, ConocoPhillips and ExxonMobil are the three biggest energy players in Alaska’s North Slope.

Tony Palmer, TransCanada’s vice president of Alaska development, told reporters at the conference that having government and industry on the same page for a project of this scale is critical.

Palmer said the act has set out what TransCanada’s obligations are to the state and what the state’s obligations are to the company, providing TransCanada with a clear understanding of how to proceed.

TransCanada and ExxonMobil have offered BP and ConocoPhillips an equity stake in their proposal, but so far no negotiations have taken place, he said.

TransCanada has reworked some of the commercial terms for its proposal since filing its AGIA application in late 2007. Those changes could save shippers a total of about $500 million every year if they sign up for that project later this year.

Canadian Press

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