TransCanada Tracking to Build Alaska Natural Gas Pipeline

TransCanada Corp. is one legislative hurdle away from landing a lucrative Alaskan licence to pursue the most expensive private-sector construction project in North American history, after the company's proposal for a massive natural gas pipeline won a key vote in the state's House of Representatives.

The house voted 24-16 in favour of a bill that would award TransCanada the pipeline licence under the Alaska Gasline Inducement Act (AGIA), a year-old program spearheaded by Governor Sarah Palin to kick-start the long-dormant concept of a pipeline to deliver the state's natural gas to the continental U.S. market.

Under the program, TransCanada would stand to receive up to $500-million (U.S.) of government funding to advance the project to the construction stage by 2014 - a complex planning and permitting process that the company has estimated would cost it $625-million.

Should the project go into construction, TransCanada has estimated its budget at $26-billion - more than 60 per cent higher than the estimated cost for the proposed Mackenzie gas pipeline in the Northwest Territories, and more than twice the total cost of the Keystone pipeline, which TransCanada and partner ConocoPhillips Co. recently committed to expand and extend to deliver Alberta crude to the U.S. Gulf Coast.
The bill passed the house without any of the contentious amendments that had been proposed by several legislators. It also passed a "reconsideration" vote - its final reading in the house - yesterday afternoon.

Now, the bill proceeds to the state Senate, which most observers expect will approve the licence before the Aug. 2 deadline for final passage of the bill. However, many of the issues and proposed changes that came up in the house could well resurface in the Senate hearings and debate.

"We have to await judgment of [the] Senate," said Tony Palmer, TransCanada's vice-president of Alaska development, in e-mailed comments yesterday, adding that the exact timing of a Senate vote remains up in the air. "We wouldn't prejudge how the votes will come down in the Senate."

Some senators remain concerned that the government is poised to give TransCanada a handout while two of the big producers who actually control much of the natural gas - BP PLC and ConocoPhillips - have proposed their own pipeline project outside of the AGIA process, seeking no upfront government money.

Ms. Palin pleaded with legislators this week to leave the bill alone, arguing that any amendments would set back the pipeline proposal by at least a year, if not undermine the AGIA program entirely.

"A last-minute change sets a horrible precedent, if the result is that we have to begin the process all over again because legislators added new terms," the Republican Governor said in a statement. "It's not realistic to expect businesses to go through the process all over again and absorb the time and expense."

Meanwhile, the government of the Northwest Territories - which has been touting the Mackenzie pipeline project to deliver its own natural gas to southern markets - had only positive things to say about the Alaskan house's passage of the TransCanada licence.

"The Northwest Territories has, for almost a year now, been promoting the benefits of Arctic natural gas from the Northwest Territories and Alaska," said Bob McLeod, the territory's minister responsible for energy initiatives.

"Despite what media pundits or columnists may wish to imply, the Mackenzie project and the Alaska gas pipeline are not competing projects. They are two phases of a comprehensive objective that will ensure a secure and stable energy supply for the future."