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Will TransCanada's new projects hurt chances for Alaska LNG?

Alex DeMarban
Aaron Jansen illustration

Alaska's pipedream to export its vast riches of natural gas were pounded again last week, as the same pipeline builder licensed to build and operate a mega-gasline in Alaska announced it had been selected to build a potentially competing project in western Canada.

It's the second such Canadian line that TransCanada has won the right to design and build in recent months, raising questions about where the pipeline builder -- eligible for up to $500 million in a state subsidies to build the Alaska line -- will focus its attention in the coming years.

Adding to concerns about the long-sought Alaska gasline project -- considered vital to the state's economic future -- is the fact that numerous potential Lower 48 competitors are cranking up efforts to export liquid natural gas to Asian markets. Numerous applications to do just that sit before the Department of Energy, putting those projects ahead of Alaska in that regard.

No such large-scale liquefaction plants exist on the continent at the moment, but blossoming gas production thanks to the shale boom has companies anxious to build them so gas can be sold overseas, especially to China and Japan.

More promising 4 years ago

The future seemed brighter for Alaska in 2008, when then-vice presidential candidate Sarah Palin told the nation she'd fought to bring a $40 billion natural gas pipeline to fruition to help American gain energy independence. That year, the Palin administration awarded TransCanada the right to design and operate a natural gasline tapping the North Slope, helped by the state's massive subsidy.

More than four years later, Alaska has paid out $222 million toward that effort without any Alaska gasline construction – or even a consensus on where it will go. In fact, the market has changed so much that TransCanada and its oil company partners have had to head back to the drawing board for a massive reshifting of the line’s proposed route. Instead of going into Alberta, Canada, to tie into a pipeline system serving the Lower 48, TransCanada last year started studying an 800-mile-or-so route from the North Slope to tidewater in Southcentral Alaska.

In Canada, meanwhile, the Calgary-based company is optimistic about its latest project. It announced Wednesday it'd been selected by Progress Energy Canada Ltd. to build the Prince Rupert Gas Transmission Project.

The 470-mile long large-diameter line will move 2 billion cubic feet of gas daily from the North Montney shale fields in eastern British Columbia to the Pacific coast near Prince Rupert, the company said in a release. There the gas will be chilled into a liquid at Progress' proposed Pacific Northwest LNG export facility.

The gasline can be expanded to handle 3.6 billion cubic feet of gas per day, TransCanada said.    

That's slightly more than the 3.5 billion cubic feet a day that would be exported from Alaska's line under the latest plans announced in October by TransCanada and partners ExxonMobil, BP and ConocoPhillips. In a joint letter sent Oct. 1, the four companies' executives told Alaskans that building the Alaska line, as well as a liquefaction plant and other components, would involve a "peak construction workforce of up to 15,000, a permanent workforce of more than 1,000, and an estimated total cost in today's dollars of $45 to $65+ billion."

From design to construction, the so-called Alaska Pipeline Project could take more than 10 years, the companies said.

Huge Canadian gas field

TransCanada's recent press release about the Prince Rupert project said it expected to provide 2,500 jobs during three years of pipeline construction. The line should be in service by the end of 2018.

It's the second pipeline project the Calgary-based company has won in recent months to deliver gas to Canada's west coast where it can be liquefied. In June, the company was selected to build Coastal GasLink, a multi-billion dollar supply pipeline for a liquefaction export terminal proposed in Kitimat, British Columbia. Royal Dutch Shell Plc is leading that project, along with Mitsubishi Corp., Korea Gas Corp. and PetroChina Co.

Both pipelines await corporate and government approval, Bloomberg reported. The same Bloomberg article, quoting TransCanada Chief Executive Officer Russ Girling, noted that recoverable gas in western Canada has grown to 400 trillion cubic feet, with more expected to be discovered.

That overshadows Alaska's North Slope, said to contain 35 trillion cubic feet of natural-gas reserves and more than 200 trillion cubic feet of undiscovered, technically recoverable gas.

Do TransCanada's efforts in Canada put them in a conflict of interest with Alaska's line?

"Not at all," said TransCanada spokesman Shawn Howard. "Ultimately it's going to be up to the market and producers or whoever to sign up their customers. That's what's driving these projects." 

Competing for Asian market  

Joe Balash, deputy commissioner for the Department of Natural Resources, said there's no conflict-of-interest provision under the Alaska Gasline Inducement Act.

TransCanada operates 42,000 miles of pipeline, almost enough to wrap the Earth’s equator twice. It's no surprise the developer of the most extensive pipeline network in North America would engage in other proposals, he said. 

"The really important takeaway from our perspective on this is there is a hungry market for LNG in the Pacific Rim and we're not the only game in town," he said. "We do have to compete to get that market share."

Is there concern that TransCanada's focus will be divided and the Alaska project will get less attention?

"We are a big company, and we're able to look at a number of different priorities at the same time," said Howard, with TransCanada.

Committed to Alaska gas line?

"(TransCanada) remains committed" to the Alaska proposal and sees the state as an important growth opportunity, Balash said, adding that state officials meet every other week with TransCanada officials and monthly with staff on the Alaska Pipeline Project to assess progress.

"It's part of our due diligence to ensure funds they request for reimbursement under the (AGIA) license are backed up with real benefit or material (evidence)," he said.

Currently, the oil majors in Alaska and TransCanada are in the concept-selection phase of the Alaska Pipeline Project, spending tens of millions of dollars and employing some 200 people to study the best pipeline route from the North Slope to a port where the gas can be chilled into a liquid and shipped, he said. For example, the pipeline staff flew an electromagnetic survey device this summer around Seward, raising concerns among some residents that the device could open locks at the jail, he said.

"There have been screening-level type surveys and estimates done," he said.

Persily: no conflict

The state is anxious to see the project advance to the next stage, an effort involving preliminary engineering and design. The companies say the phase will employ some 500 people and cost hundreds of millions of dollars. That phase will include things such as survey and field work and data collection starting this summer, Balash said.

Is Balash worried the Canadian projects will move ahead more quickly than Alaska's, hurting prospects for the Alaska gasline?

"All I can say is we are looking virtually every day for ways to shorten those timelines," he said.

Larry Persily, Alaska's own federal natural gas pipeline coordinator, said no conflict exists for TransCanada. The company isn't heading up the project and they'll only build the line, not the liquefaction plant.

"The entity that builds and operates a pipe is immaterial to whether any of these three projects get built," Persily said.

And while companies in the Lower 48 have filed applications for 15 projects with the Department of Energy to export liquefied gas to such nations as China or Japan, something Alaska's pipeline builders haven't done, that doesn't give those efforts much of a head start, Persily said.

Alaska does have a lead in building a gasline and large-scale gas-liquefying project in other important ways, he noted. Many facilities needed for gas production already exist on the North Slope, such as roads, airports and man camps.

"That makes our gas that goes into the pipe more affordable than if you're developing a totally new gas field and you have no infrastructure," he said.

Contact Alex DeMarban at alex(at)alaskadispatch.com