JUNEAU -- There's been no reportable progress toward reaching agreements in the year since TransCanada Corp. announced that it had received bids from "major industry players and others" interested in using its proposed pipeline to transport natural gas from Alaska's North Slope to market.
Antsy lawmakers have already started calling for the state to consider cutting its losses and looking for other options to commercialize Alaska's vast gas stores. Those calls could start to grow with the anticipated Tuesday release of a report detailing options for building a much smaller, in-state line.
TransCanada said it's moving forward with its project and continuing negotiations, trying to resolve issues within its control. But the company is also awaiting resolution of a long-running lease dispute critical to the project's advancement, and talks between the state and energy companies on long-term tax and royalty terms.
Officials say talks continue, as they have for well over a year now, aimed at resolving the Point Thomson gas lease issue. As for fiscal terms, Gov. Sean Parnell said there's no point negotiating those until there's an actual project.
TransCanada, which is working with Exxon Mobil Corp. to advance a project, could sign agreements contingent upon resolution of those issues. But the whole idea behind those agreements is that once shippers sign them, they essentially assume part of future development costs. If those agreements are heavily conditioned, how valuable would they really be?
At this point, too, it's not clear there will ever actually be a project; a competing pipeline project, a joint effort of BP and Conoco Phillips, recently folded, citing lack of market support. It was widely believed that only one pipeline would get built, anyway, if one got built at all. But the fate of the competing Denali proposal has stirred questions about whether the economics exist for a big line to move ahead.
TransCanada, which missed an end-of-the-year self-imposed target for reaching agreements, won't say what the hang-ups are in its current talks with shippers, citing confidentiality. And it's set no timeline, at least publicly, for when talks might end.
The company has said that while talks continue, it's moving forward with engineering, environmental and other aspects of the project, as called for in its agreement with the state. Unlike Denali, TransCanada is receiving state support for its effort, the promise of up to $500 million in reimbursable costs under terms of the Alaska Gasline Inducement Act, or AGIA.
Therein lies the rub with lawmakers, who want evidence that this is a viable project and who want to make sure that the state isn't throwing good money after bad.
Sen. Bert Stedman, the co-chairman of the powerful Senate Finance Committee, said there's a "high likelihood" that AGIA is a "dismal failure." Stedman said the state needs to come up with an exit strategy if there is no progress toward securing agreements by the time lawmaker reconvene next winter and it's the "same old, same old" from TransCanada. "I think it's foolish business practice to have blinders on and go down one road and never review your business strategy," Stedman, R-Sitka, said. "Because even the best laid plans go awry."
This month marks a year since TransCanada ended its "open season," or process of courting gas producers and seeking shipping commitments for a proposed line. Parnell said he's disappointed that it's taken so long for agreements to be reached but said he's pursuing "every option" for commercializing Alaska's gas, whether that's under the framework of AGIA, an in-state line or some other project.
TransCanada has proposed delivering about 4.5 billion cubic feet of gas per day to North American over overseas markets. Cost estimates for its two options have ranged from $20 billion to $41 billion for a longer line that would extend into Canada.
Parnell said he welcomes the in-state gas report and looks forward to the options it will spell out for moving gas "to Alaskans and points beyond."
The focus behind the in-state line has been on ensuring residents along Alaska's Railbelt have access to reliable, affordable energy, though it's also expected that project would require a large subsidy. House Speaker Mike Chenault, a leading proponent of the in-state line, said Alaska can't afford to wait for a big line -- like TransCanada is proposing -- to get built. TransCanada has set a goal of being in service by about 2020, though some analysts believe it could be a decade or more beyond that before a project of its size is built.
"I'm interested in moving us forward," Chenault, R-Nikiski, said. "I'm tired of sitting here and doing what we've done the last number of years, waiting for the next gravy train. I don't see that gravy train coming."
Alaskans have long dreamed of a major gas pipeline as a way to help shore up revenues from declining oil production, create jobs and provide a more reliable source of energy. Supporters of AGIA say Alaska is closer than ever to realizing that dream and needs to stay the course.
