JUNEAU -- Is Alaska unnecessarily looking at sharing its gas line profits with TransCanada? Or is the big Canadian pipeline company coming to the rescue of a suddenly cash-strapped state at a nominal cost?
The issue of a role for TransCanada in the development of a $45-65 billion North Slope natural gas pipeline has been perplexing to many, as the company went from the state's choice to lead an overland pipeline project to feed Alaska's gas to the North American market to simply a participant in a producer-dominated liquefied natural gas export line to Nikiski.
Senate Bill 138, moving forward with planning for a natural gas pipeline, has already passed that body and is now under consideration in the House of Representatives. It grants TransCanada a key role in the state's likely share in a quarter of the project.
Despite the Senate approval of the bill, the role of TransCanada remains an issue, with Senate Finance Committee Co-chair Kevin Meyer, R-Anchorage, saying it was the "main concern" with moving forward with what's likely to be a decade-long effort. He voted for it.
Also raising concerns was Senate Minority Leader Hollis French, D-Anchorage, who said giving up a portion of Alaska's share in the project threatened Alaskans' desire to actually own the project. He voted against it.
And Senate President Charlie Huggins, R-Wasilla, said he's been skeptical of TransCanada since the Alaska Gasline Inducement Act, the now-stalled overland pipeline plan that began in 2007. He voted for Senate Bill 138.
The debate over TransCanada's involvement, despite praise for the company itself, goes back to 2008 AGIA battles. Huggins voted against selecting TransCanada to partner with the state and receive as much as $500 million to pursue permits for the project. Nine companies applied for the AGIA subsidy, but Huggins said that because only TransCanada met met all of the state's conditions, it wasn't really a choice.
In 2008, both Meyer and French voted for the TransCanada deal that Huggins voted against.
Now, in the House of Representatives, they've begun taking up the battle over the role of TransCanada.
At a House Finance Committee meeting Tuesday, Parnell administration consultants told legislators that Alaska needs TransCanada as part of the deal.
Alaska will have to borrow billions of dollars to pay for its share of the project, but with oil revenues declining it may find financial markets reluctant to lend at attractive rates.
"The state may start hitting its debt limits pretty quickly without TransCanada, or (another) partner, or trying to go it alone," said Deepa Poduval with Black & Veatch, the consulting firm with which the Department of Natural Resources contracts.
TransCanada as investor will help the state afford the project, she said. And anyway, the way the deal is structured, Alaska would make most of its money from selling its share of the gas, not from pipeline tariffs, she said.
"From a net present value standpoint, it was kind of a wash whether the state went alone or had TransCanada in the mix," Poduval said.
But committee members wanted to know: If the state has to have a partner, does it need to be TransCanada, with its controversial history in Alaska? The state's big oil producers and natural gas leaseholders opposed AGIA, and BP and ConocoPhillips even began a competing pipeline project, although they have since scrapped that effort.
Poduval said a partner is needed, and TransCanada's long history of working with and in Alaska is valuable, she said.
"That's a dynamic that takes time to create, and it will take time to create if there's another party that comes into the mix," she said.
Going out to bid for a new partner is likely to mean costly setbacks for a gas line, she said.
"Having TransCanada in the mix helps retain the momentum of the project," she said.
But another possible benefit to TransCanada also prompted skepticism.
TransCanada's current involvement in the AGIA process includes a provision aimed at limiting Alaska's ability to work with other partners on potentially competing gas line projects, and it may expose the state to damages claims by TransCanada that under AGIA could be tripled. If the company is involved in the new LNG export plan, an AGIA claim would not be possible.
Rep. Mia Costello, R-Anchorage asked if the state is exposed to "treble damages" if it goes with someone other than TransCanada.
"Are we just sweeping this under the rug?" she said.
Poduval recommended that the committee seek answers about the AGIA contract from the Alaska Department of Law.
The issue of TransCanada's involvement was raised earlier by Roger Marks, a consultant hired by the Legislature. The Senate never requested public testimony from him, but the House is expected to hear from him this week.
Contact Pat Forgey at email@example.com