TransCanada: 'Multiple bids' for Alaska gas line

[July 31, 2010]  JUNEAU, Alaska (AP) -- TransCanada Corp. has received multiple bids from "major industry players and others" that want to use its proposed pipeline to transport natural gas from Alaska's North Slope to market, a company official said Friday.

As expected, few details were released Friday, when TransCanada ended its 90-day process of courting gas producers and seeking shipping commitments for a proposed line. One reason cited for the secrecy was competition: Denali-The Alaska Gas Pipeline, a joint venture of BP PLC and ConocoPhillips, began its own open season a few weeks ago.

Tony Palmer, TransCanada's vice president of Alaska development, said he is encouraged about the pipeline's prospects for moving forward if "key conditions" are met.

He didn't specify those conditions but said the next step will be for TransCanada to work with potential customers to try to resolve their issues in the coming months. The goal is the signing of precedent agreements that let the company start spending hundreds of millions of dollars toward building a pipeline.

The stakes are high and the interest is intense: A gas pipeline has been held out for years as important to Alaska's long-term economic future, because the production of oil, which is largely responsible for keeping the state running, continues to decline. But questions remain about whether there's enough demand for Alaska's gas to justify a pipeline, and just how a line will be financed.

The drama and the political parlor game of "will it or won't it get built" is playing against the backdrop of a campaign for governor, with the gas line a leading issue in the GOP race.

Only one project is expected to go forward -- if one advances at all. Officials both TransCanada and Denali said there have been no merger talks, and Denali spokesman Dave MacDowell said the results of TransCanada's open season "won't change what we're doing."

TransCanada, which is working with Exxon Mobil Corp. to advance its plan, successfully bid for an exclusive state pipeline license and the promise of up to a $500 million reimbursement under the Alaska Gasline Inducement Act championed by then-Gov. Sarah Palin. The Denali project is getting no such state support and has said it doesn't agree with all the act's terms.

TransCanada and Denali each have put forth plans to deliver about 4.5 billion cubic feet of gas per day to North American markets by larger lines to Canada, with goals of being in service by about 2020. Denali has estimated its project will cost $35 billion, while TransCanada has put its figure at $32 billion to $41 billion.

TransCanada also has offered a shorter, cheaper option: a $20 billion to $26 billion line that would lead to a liquefied natural gas facility that could export fuel by ship. MacDowell has said Denali would consider such an option if potential customers wanted it.

TransCanada declined to say which option garnered greater interest.

It was widely assumed that any bids received would have conditions. For example, oil and gas company officials have previously said they'd be seeking long-term fiscal certainty from the state -- a term that would be out of TransCanada's control and likely to stir political debate.

Marty Rutherford, a deputy commissioner with the state Department of Natural Resources and head of Alaska's gas line team, said there have been no such negotiations with companies so far, and any company seeking long-range tax terms from the state would have to prove "it's a need, and not just a want."

She said the state apparently received the same information from TransCanada as reporters received: "multiple bids from major industry players and others for significant volumes" and encouragement about the line's advancement if key issues were resolved.

Gov. Sean Parnell, who has come under fire from his Republican rivals for supporting the Inducement Act that they see as wrong-headed, hailed Friday's results as a positive sign while acknowledging a pipeline is far from secured.

The Alaska Natural Gas Development Authority said it submitted a bid for capacity on the project and would do the same for Denali's, chief executive Harold Heinze said, with a goal of providing a "placeholder" for Alaska electric utilities should either plan move forward.

Denali ends its open season in October.

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Online:

TransCanada and Exxon Mobil's plan:
http://www.thealaskapipelineproject.com/

Denali: http://www.denalipipeline.com/

Alaska Gasline Inducement Act:
http://gasline.alaska.gov/

[Associated Press; By BECKY BOHRER]

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