Tag Archives: alaska natural gasline

Gasline legislation passes the Senate. Stedman votes no, details concerns in letter.

The Alaska state Senate voted 15-5 to pass legislation that would enable the large diameter, natural gas pipeline to move forward. The vote was 15-5. Four Democrats and one Republican voted against the bill. Democrats proposed 16 amendments–ranging from greater ownership in the line to a change in tax structure–all of which failed.

At anywhere from $45 to $65 billion, if built, it will be one of the biggest, most expensive projects in the world.

The proposal partners the state with BP, ExxonMobil and ConocoPhillips as well as Canadian pipeline company TransCanada Corp. It’s the latter partnership which appears to be the major concern for most who voted against it, including Republican Sen. Bert Stedman, who wrote the following letter detailing his concerns. The legislation now moves to the House. It’s not normally so, but in this case that chamber appears to be the more deliberative body.

Legislature starts to question TransCanada’s role in building LNG line

Members of the Alaska state Senate are beginning to question whether or not TransCanada is the right company for the state to partner with to build a large diameter natural gas pipeline that all told could cost more than $60 billion. The pipeline, which would carry natural gas from the North Slope to tidewater that would be shipped as LNG, would be one of the largest construction projects in the world. Legislation being considered this session, introduced by Gov. Sean Parnell’s administration, would begin to bind the state with TransCanada for generations.

However, the state has not put the newly conceived LNG project up for bid. Nor has it appeared to consider other companies that might partner with the state to build the line.

“It’s not Exxon, BP and Conoco’s responsibility to see that the state is aligned and to protect our interests. We have to protect our interests with TransCanada,” said Sen. Bert Stedman during a Senate majority press conference. Other members of the majority, including Sen. Peter Micciche, said during the press conference that they will look hard at the partnership.

The administration has proposed legislation that would begin the process of building the natural gas pipeline, a project that’ s been in the works for over 40 years. The initial legislation is just a start, the administration has said. However, it’s a start with a start at binding agreements and a multimillion dollar price tag attached to it.

TransCanada and Alaska go back a long way, most recently when it was the company chosen by the legislature in 2008 to build a pipeline to go from Prudhoe Bay through Canada. It was the only company then that designed a project to fit specific “must haves” that were delineated by Gov. Sarah Palin’s administration.

In exchange, the company was entitled to receive $500 million of state money to allow it to get to crucial commercial agreements with the companies that own the lease rights to the gas—ExxonMobil, BP and Conoco– and companies willing to ship the gas. For various reasons, those commercial agreements all dissipated. Legal contracts that the state has with TransCanada, however, haven’t.

Some legislators are wondering if the state has stuck with TransCanada simply to delay potential legal issues.

Democratic Sen. Hollis French would like the Senate Judiciary Committee to explore the legal contracts the state has with TransCanada. So far, however, Senate President Charlie Huggins hasn’t assigned that bill to the committee.

“There’s discomfort in the Capitol about whether we’re getting shoehorned into this new gasline deal with a partner that didn’t deliver in the last deal,” French said. “What’s the cost of shopping around?” he asked.

Legislators have likened the relationship with TransCanada to a marriage. French continued with the metaphor. “It’s like we’re staying in the marriage for the sake of the children without knowing who the children are,” he said.

The state has hired various consultants to help it understand that contracts. However, the bulk of committee testimony so far has been used by TransCanada, Exxon, ConocoPhillips, and BP, all of whose testimony appears to be coordinated.

Meanwhile, rumors persist that behind closed doors, some of the producing companies are also quietly questioning TransCanada’s role in the project.

Contact Amanda Coyne at amandamcoyne@yahoo.com

Correction: The original version of the story said that Sen. Hollis French was on the “Judicial” Committee. There is no such thing as a “Judicial” Committee. It’s the Judiciary Committee and Sen. Bill Wielechowski is now the minority member.

Alaska gas: We might finally be on a path to getting it to market

Ken Cohen, vice president of public and government affairs for ExxonMobil Corp., wrote a blog post about Alaska’s natural gas pipeline entitled, ‘Will the energy revolution go ‘North to the Future?’”

His answer: Yes, if the producers including Exxon and the State of Alaska, can get along and pass “fiscal terms” in the upcoming legislative session.

“Though Alaska has long been considered a leading energy-producer, it hasn’t been regarded as a key part of the current, largely shale-driven supply revolution that is creating a new era of American energy abundance,” Cohen wrote. “An agreement that Alaska officials brokered with a number of industry participants last week could go a long way to changing that perception.”

The agreement that he’s referring to was signed on Jan. 14 by Gov. Sean Parnell’s administration and the producers–ExxonMobil, BP, and ConocoPhillips–as well as TransCanada, which would build the line. Among other things, it involves the state taking between a 20-25 percent equity stake in the project, which is expected to cost between $45 and $65 billion.

The fact that Cohen, one of Exxon’s most public and prominent executives in the company, is writing about it means that Exxon is anxious to get this project going, which has not always been the case.

For more than 30 years, Alaskans have watched as plans to build the more than 800 mile pipeline have come and gone. The market simply wasn’t ready.

People bought property based on a headline in 2008, proclaiming that the pipeline project was all but a done deal. It wasn’t.

I wouldn’t yet buy property based on the current plan, but it is different than any of the previous plans. The last time, under Gov. Sarah Palin, the big producers–including, initially, Exxon–were cut out of the building process, and therefore had less control over the profit margins and at what price smaller companies paid to ship their gas. TransCanada had the license to build the line, but the producers weren’t playing and wouldn’t commit their gas.

So, it failed. Call it unfair and anti-competitive, but the producers have rights over the leases. (It might be our gas and oil, but barring a huge court challenge–one that would make the Exxon Valdez court challenges look expeditious in comparison—they are lease terms that we agreed to.)

This time, for the first time ever, BP, ConocoPhillips, Exxon and the state all agree on a path forward.

In the blog post, Cohen calls for the legislature to iron out “certain fiscal terms” this legislative session.

Such terms involve the state moving from a net to a gross tax. Currently, the state taxes gas much like it does oil and at about the same rate, even though oil is much more profitable than gas.

Parnell deserves credit for working diligently and quietly behind the scenes to get the state this far. But this is a hugely capital intensive investment, unlike anything the state has ever dealt with. The stakes couldn’t be higher, and he will need a groundswell of public support behind him.

Parnell hasn’t yet proven that he’s adept at reaching out to the public to get that kind of support. He’s not yet had to, and without it, it could very well fall apart, particularly because it’s an election year. It’s happened before: just ask Govs. Frank Murkowski and Sarah Palin.

Too, legislators, particularly those in the opposing party, will have to do their best to resist taking politically-expedient pot shots, which they haven’t been adept at doing either.

Gubernatorial Democratic candidate Byron Mallott said on Saturday that although a lot more work needed to be done, it appeared that the agreement was a “step forward” in getting the pipeline built.

Mallott was being a statesman. Maybe it will catch on.

Contact Amanda Coyne at amandamcoyne@yahoo.com