Gasline Update and Energy Town Hall Meet

Energy

Town Hall Meeting
Friday, July 18

Natural
Gas Pipeline Update

Who is Proposing to Build a Gasline?

Two pipeline entities have proposed building a natural gas pipeline from the North
Slope to the Alberta Hub where the gas can be sent to various North American markets: TransCanada, an independent pipeline company; and Denali which is owned by ConocoPhillips and BP.

TransCanada
- TransCanada is the successful applicant for a state-licensed Alaska Gasoline
Inducement Act (AGIA) pipeline. They submitted a qualifying application that
entitles them to $500 million in assistance and other state inducements in return for commitments that help ensure construction, help ensure Alaskans are employed, and add to the state’s “take” if North
Slope gas is delivered to market.

TransCanada
is a 50-year-old company that builds and owns hydrocarbon transmission lines in
Canada and the U.S. They already have many of the permits necessary for construction. They have submitted reams of information.
They don’t have access to gas so approval does not guarantee
construction.

Denali
- Denali is a pipeline company that is only a few months old but is owned by two multi-national oil and gas companies operating around the world and in Alaska: ConocoPhillips and BP who are two of the owners of the Trans Alaska Pipeline System (TAPS) that moves oil from the North Slope. Denali
did not apply for the state AGIA license.

The "Denali – The Alaska Gas Pipeline" plan has no cost estimate and they’ve provided the legislature only a 16-page PowerPoint presentation. They say they plan on spending $600 million to get to an open season where shippers hopefully will bid to commit gas to their pipeline. Denali has said that they will continue to flesh out their proposal regardless of whether or not TransCanada gets a state license.

When Would a Pipeline Be Built?

Given the field work necessary to design and engineer the line; permitting challenges;
the time necessary to arrange financing; the regulatory process; and a construction timeline; a realistic but still optimistic definition is about 10
years.

What Route?

Down the Alaska Highway to the Alberta Hub where gas

can be shipped in different directions to North American markets. TransCanada
has also committed to building either a gasline or gasline spur to an LNG plant
on Alaska’s
coast if enough gas is committed to by North Slope Liquid Natural Gas
shipper/producers.

When Will the Vote Take Place?

The TransCanada application is now before the legislature for approval during the
special session. We have 60 days (until August 2nd) to vote yes or no to license TransCanada.

We have enough information. Since May 28, in communities all around the state, we
have listened to the administration, TransCanada, consultants, and the public
speak about the proposal and what it means for our future. Many
House members, me included, unsuccessfully pushed House leadership for a special
session vote on TransCanada to take place on July 15. Instead we will wait until
all members are back from the scheduled break we are on.

It’s my fervent hope that we can vote on the issue soon so we can move on to the
other special session agenda items related to short-term energy solutions.

Vote Yes or Vote No?

Unless I hear something new to convince me otherwise, I’m inclined to support TransCanda
as an independent pipeline built by an independent company and am skeptical of
the Denali plan that is heavy on media advertising and light on details.

What Exactly is AGIA?

In 2007, the legislature passed the Governor’s Alaska Gasline Inducement Act which
provides a structure to get Alaska’s natural gas to market. AGIA is based
on the idea that open competition will lead to the best project for Alaska.

Submitted
Bids Need Legislative Approval
- AGIA requires companies wishing to build a pipeline for Alaska’s gas to submit
bids to the administration. If the bids met AGIA’s requirements, they would be
sent on to the legislature for final approval of a license to start the process
toward building a gasline.

Inducements
- To the successful applicant, the state is offering a series of inducements
including: up to $500 million as a state subsidy for work done up front that is
directly and reasonably related to obtaining FERC or RCA certification;
expedited permit review; a ten-year tax freeze on their gas production taxes and
modification of how royalties and tariffs are calculated.

Federal
Certification
- The licensee is entitled to certain benefits in exchange for a commitment to
work toward a certificate from the Federal Energy Regulatory Commission. To get
this certificate, the licensee has to design and engineer the pipeline, acquire
all necessary permits and rights-of-way and prove, as well as can be proven,
that the project is economic. The hope is that, once all this is done, the
North Slope oil producers will no longer have
any plausible reason to hold their gas back from the line.

Getting
the Gas
- If the licensee can convince the producers to ship the gas they control, it
will be able to secure financing and begin construction. If it can’t, the
license will revert to the state, which will then be in the position to award
the completed certificate to someone else, or to pursue other means of getting
access to the gas.

Investing
in an AGIA Approved Project
- Finally, nothing in AGIA prohibits the multi-national gas producers, including
the Denali owners, from negotiating an equity
stake in the TransCanada pipeline. In fact, that may be optimal for the state,
the producers and TransCanada but that convergence of interest evaporates if an
AGIA license is not given to TransCanada.

More
Detailed Information
- For more information on the gaslines AGIA, see a terrific summary – from which
much of this information was taken – by the Juneau legislative delegation at http://www.akdemocrats.org/juneau/071108_JLD_AGIA_1.htm

Forwarded by Phyllis Stickle
Posted By Thom