Anchorage Daily News

JUNEAU - Alaska lawmakers have approved a state license for TransCanada Corp. to pursue construction of a natural gas pipeline.

The award ends a decades-long battle to open up North Slope natural gas for use in North American markets, with 4.5 billion cubic feet of natural gas shipped daily.

The state Senate approved the bill Friday. The House gave its OK last week. The bill only awaits the signature of Gov. Sarah Palin, who has backed the Canadian proposal from the start.

"It will be our Alaska gas flowing to provide aid to those in the Lower 48, who are turning to Alaska, waiting and wanting Alaska to help," Palin said after the Legislature's support.

The license does not guarantee construction, but it means TransCanada must move forward on costly federal permitting applications for the 1,700-mile pipeline. The project is estimated to cost between $26 billion and $30 billion.

The license comes with up to $500 million in state seed money. It also sets up a race with a competing pipeline venture established by oil giants BP and Conoco Phillips.

The two companies did not submit a proposal under the state's Alaska Gasline Inducement Act -- or AGIA -- because they found the bid requirements too restrictive.

AGIA was passed in May 2007, and it called for bidders to guarantee progress toward construction of a pipeline and submit an application deemed friendly toward new energy exploration.

Lawmakers backing the license said this route represents progress on pipeline development that Alaska has sorely lacked. Rejecting it would have set the state back at least two years.

Two years ago, the Legislature had failed to support a contract on fiscal terms -- long-term taxes and royalties -- that former Gov. Frank Murkowski set with North Slope leaseholders BP, ConocoPhillips and Exxon Mobil Corp.

That proposed contract did not guarantee a pipeline, either. At the time, too many lawmakers felt the deal gave away too much to the oil companies -- locked in a tax rate for up to 45 years.

Most lawmakers did not have the same concern in awarding a license to TransCanada.

"This is a choice between action and doing more of the same, a choice between moving forward and the status quo," said Sen. Bill Wielechowski, D-Anchorage, one of 14 votes backing the license.

"It's a choice between do we sit back and wait or do we take control of our own destiny," he said. "We are taking control of our own destiny."

Sen. Bert Stedman, R-Sitka, said he believes the license will not be the deal-breaker in getting a gas line built and could end up being a bad deal should the natural gas price markets change. Stedman was among five dissenting Senate votes.

"It was the earnest effort of the last three administrations to get this gas line moving forward," Stedman said. "(But) the market is going to move this line forward. My concern is, this license is going to tie Alaska's hands."

Whatever project emerges as the ultimate winner, it will still be at least another 10 years before any market sees Alaska's gas.

And whoever builds the pipeline must still secure long-term bids from companies to ship gas. These are called firm transportation commitments and they underpin the pipeline's financing. Without them there is no project.

TransCanada Vice President Tony Palmer said he understands this but remains confident that the company's history in negotiating shipping contracts can prevail.

"We work with (oil and gas firms) every day to get their gas to market," Palmer said. "The three largest leaseholders on the North Slope are some of our largest customers. In fact BP is our largest gas customer today on our North America pipeline system."

Palin, who is in her second year of her first four-year term, beamed over the Legislature's support, but eventually tempered her enthusiasm, saying the license represents an important start, but not the final product.

"It's not a done deal. We are not turning dirt yet," Palin said. "This is a very, very significant and first step, but there is a heck of a lot of work to do."

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