Anchorage Daily News

The Palin administration Tuesday unveiled figures showing potentially fabulous profits should a Canadian company carry out its proposal to build a natural gas pipeline.

The profit projection is based on some important assumptions including future market prices for gas.

But even under an unlikely scenario of extremely low prices, the state still could reap billions of dollars over the pipeline's life, according to the analysis.

The document, thousands of pages long including attachments, is the backup for Gov. Sarah Palin's announcement last week that her administration will recommend that TransCanada Corp. receive an exclusive state license plus $500 million in public incentive money to pursue a pipeline to carry North Slope gas.

It'll be up to state legislators, who will convene in a special session beginning Tuesday in Juneau, to decide whether to grant the license to TransCanada.

The lawmakers have a big distraction -- a competing pipeline proposal from the oil company duo of Conoco Phillips and BP, which unlike TransCanada, control vast quantities of North Slope gas.

The companies say they don't need the state license and subsidy Palin is offering under the Alaska Gasline Inducement Act.

Beginning this morning, the administration is holding three days of briefings on the TransCanada project. The briefings are open to the public and begin at 8:30 a.m. each day at the Sheraton Anchorage Hotel.

Documents released Tuesday include detailed technical and financial analyses from the state's consultants such as global investment bank Goldman Sachs and engineering adviser Black & Veatch Corp.

State Revenue Commissioner Pat Galvin said TransCanada's pipeline would provide the biggest benefits to the state.

"The dollars that are generated by the TransCanada project take your breath away," Galvin said at an Anchorage press conference last week.

State officials and their consultants spent months and several million dollars analyzing TransCanada's proposal.

A key finding is the estimate of how much the state, TransCanada and the companies producing Slope gas could make on the project. To do the estimate, analysts use a measure known as "net present value," which is profit in excess of the minimum profit considered necessary for a decision to go ahead with a major project.

The state's analysis projected these excess profit levels over the life of the pipeline:

• TransCanada, $4.5 billion

• Major North Slope gas producers, $13.5 billion.

In this analysis, the state would get about $66 billion from taxes and royalties, which can't be compared to the other numbers because they include only so-called excess profits.

Analysts pin these estimates on a number of assumptions, the most important by far being the future direction of natural gas prices. The analysts relied on the federal government and two consulting firms for gas price forecasts.

TransCanada, based in Calgary, is a major North American gas pipeline operator. It is proposing a 1,715-mile, $26 billion pipeline running down the Alaska Highway from the Slope to Alberta.

The state's analysis concludes that the TransCanada pipeline would offer greater value to the state than either the Conoco-BP project or a project to export the state's gas in liquid form aboard special tankers.

The scale of the gas line project is daunting, no matter who builds it. Goldman Sachs found TransCanada to be a financially strong company but noted that "no financing of this size has been executed."

Lawmakers seem split on whether to award an AGIA license to TransCanada or avoid the commitment in hopes Conoco and BP make good on their promise to build a gas line -- long one of the state's highest economic development priorities.

"It's gonna be a gamble no matter what we do," said Rep. Mike Doogan, an Anchorage Democrat speaking Tuesday morning at a local Chamber of Commerce roundtable on the gas line.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

Gas line forum

State officials will detail the TransCanada Corp. proposal for a natural gas pipeline today through Friday.

• WHERE: Sheraton Anchorage Hotel

• TIME: 8:30 a.m. to 5 p.m. daily

• COST: Free to the public

• WATCH IT: Gavel to Gavel Alaska will carry the workshop on tape delay Thursday through Saturday. For information, go to www.ktoo.org/gavel.

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