ANCHORAGE, Alaska — Natural gas pipeline firm TransCanada’s completion of an open season Friday is a first in Alaska’s history -- and a key to financing the project.
TransCanada's open season closed at 2 p.m., and the company announced shortly afterward that several major players have made offers to ship their gas through its line.
“So here we are two years later, and we've received bids for significant volumes,” said Tony Palmer, the company’s vice president for Alaska development. “That's very encouraging from our standpoint.”
Without significant volumes of North Slope gas, there's no point in building a pipeline to the Lower 48.
“If you look at the universe of potential customers here in Alaska, the biggest players are active here in Alaska. And we're encouraged that from that universe we were able to get bids from major players,” Palmer said.
Palmer called the companies offering gas to the TransCanada line “sophisticated,” but didn’t offer details on the companies involved. He was also silent on how much gas they're willing to commit to the project, as well as under what conditions they’d do so.
“The bottom note, there's going to be some serious negotiations between many parties -- that's great,” said state Department of Natural Resources Commissioner Tom Irwin.
Irwin and his deputy, Marty Rutherford, are among the key architects of the Alaska Gasline Inducement Act, which set the stage for the open season process and for competition. They say the conclusion of TransCanada's open season is proof that AGIA is working.
Irwin told a gathering of Commonwealth North that ExxonMobil's decision to partner with TransCanada has made a big difference.
“Undeniable progress,” Irwin said. “I think we got the A team on both sides.”
The company credits ExxonMobil with helping to attract bids
for the open season.
“We hope that that's helped with the credibility of the offer we've put forward,” Palmer said.
Critics of AGIA say TransCanada's open season is no guarantee of a pipeline, and warn that bids will likely be so conditional that nothing will result -- and at great cost.
“And let's not forget, at 2 o'clock today, we start paying 90 percent of the bill -- so those are my reasons for not being terribly excited about the AGIA process,” said Rep. Craig Johnson, co-chair of the House Resources Committee.
As the state's licensee, TransCanada and its partner ExxonMobil can get reimbursed for up to $500 million in expenses. Until the close of the open season, they were reimbursed at a rate of 50 percent, so now the risk for the state has gone up.
But some who have been following Alaska's quest to bring North Slope gas to market say that without risk, there is no reward.
“From the natural gas business perspective, it's a significant day,” said industry consultant Tony Izzo.
TransCanada says secrecy during negotiations is standard. It expects to continue bargaining with producers through the end of the year.
Companies that bid on the TransCanada project are also likely to make offers in the competing Denali pipeline project, a partnership between BP and ConocoPhillips. Denali's open season closes in October.
The Alaska Natural Gas Development Authority has made its bid for space on the TransCanada project public. ANGDA says it wants to reserve capacity for in-state gas, but the amount of gas involved is relatively small compared to the volumes needed to make the project viable.
ANGDA also plans to bid on the Denali project. The authority’s director, Harold Heinze, says as a participant in the process it gains access to information.
Contact Rhonda McBride at email@example.com