Gas line slow going: Prospects may be unknown for months

Posted: Wednesday, July 21, 2010

JUNEAU -- The federal coordinator for Alaska natural gas projects said Tuesday it could be be late this year, or early next, before Alaskans know whether they're closer to securing a major natural gas pipeline.

Larry Persily said Tuesday that the public shouldn't expect any major announcements next week, when TransCanada Corp. is slated to end its three-month process of courting gas producers and securing commitments for shipping deals. He said the end of the open season will simply mark the start of negotiations between the company and potential shippers, with possible issues such as gas volume commitments, years of expected use and what a shipper wants to pay needing to be ironed out.

Once a deal is reached, the developer and shipper sign a precedent agreement, and Persily said those commitments help provide the basis for the developer beginning to spend hundreds of millions toward building a line.

All of this, of course, assumes there are bidders; the goal of an open season is to gauge interest in building a major line.

Persily said the odds for a pipeline would increase if federal legislation moves forward that pushes the nation toward greater use of natural gas.

"The hope for an Alaska gas pipeline rests on whether the market needs our gas. It's just that simple," he told reporters during an informal briefing in Anchorage. Underpinning that demand growth will be large volume, long-term users like electricity companies, not scattered individual users.

If the U.S. turns to natural gas as primary fuel for new power plants and moves away from coal plants that can be expensive to retrofit to meet changing emissions standards, "we've got a chance, I believe, for this project," Persily said.

He said federal legislation encouraging cleaner energy would help.

"I think Alaskans, while they're waiting for the results of the open season, need to think that reasonable climate change legislation really can be good for a North Slope pipeline," he said.

There are currently two competing projects vying for attention that would bring gas from Alaska's prodigous North Slope to market, and it's widely believed that only one will go forward, if, any go forward at all.

TransCanada is working with Exxon Mobil Corp. to advance its project. It's moving forward with the promise of up to $500 million from the state under an exclusive license it won under the Alaska Gasline Inducement Act, championed by then-Gov. Sarah Palin as a way to bring to fruition the long-hoped for natural gas line.

The second project, Denali-The Alaska Gas Pipeline, is a joint effort of BP America and ConocoPhillips. It began its open season earlier this month, with a run slated to end Oct. 4.

Based on the developers' own timelines, which are subject to change, and the signing of any precedent agreements, it could be late this year or early next until it's known whether Alaska is any closer to securing a line, Persily said.

That timeline puts it past the November election.

The pipeline -- and questions of how best to bring gas to market -- has become a major issue among the Republican candidates for governor. Gov. Sean Parnell has remained committed to the process he inherited when Palin resigned last year. Two high-profile challengers, Ralph Samuels and Bill Walker, believe this is a wrong-headed approach.

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