Alaska fight takes off
TransCanada says it can build more quickly, efficiently
Claudia Cattaneo and Jon Harding
Financial Post
canada.com
Friday, April 08, 2005
CALGARY - TransCanada Corp. launched a counterattack yesterday against pipeline rival Enbridge Inc. over who gets to build the US$20-billion Alaska gas pipeline.
The company defended its legal rights to build it under the Northern Pipeline Act (NPA), a law passed more than 25 years ago, and ruled out any co-operation with Enbridge, which has proposed a competing project with the support of Alaska natural gas producers.
"We are not a Johnny-come-lately that has just shown up and decided to throw up a proposal for building a pipeline down the Alaska Highway," Hal Kvisle, CEO of TransCanada, said yesterday, breaking the firm's silence in the hotly contested battle. "We have been at this diligently for 25 years. We have invested more than $2-billion."
Mr. Kvisle took a direct shot at Enbridge. "They, in my view, are not a critical player in this whole affair."
TransCanada said its proposal could result in $10-billion of toll benefits to gas shippers.
Construction of the proposed pipeline has become a controversial issue in Canada because the Canadian government is under pressure to decide whether it will continue to support the NPA or whether it will allow a new project regulated under the National Energy Board, effectively allowing competitors to come forward with competing proposals.
A decision is required for the project to move ahead.
Enbridge and Alaska producers, ExxonMobil Corp., BP PLC and ConocoPhillips, escalated their lobbying efforts in recent weeks asking Ottawa to open the process to competition. Indeed, they even took out full-page ads in national newspapers to bolster their case.
"Realize the Northern Pipeline Act is over 25 years old now, and the certificates are for a project that wasn't built," Pat Daniel, CEO of Enbridge, said recently. "I think we need a fresh look."
Observers said Enbridge and the producers have been gaining political ground as a result of their campaign. Before, Ottawa was seen as favouring the NPA because of commitments made in the past and concern about a legal challenge from TransCanada.
Mr. Kvisle said TransCanada had opted to keep a low profile because of ongoing negotiations with governments, producers and other interests in "one of the most significant gas transportation deals ever put together in North America."
It decided to speak out now because it felt it was the right time to argue that TransCanada could get the pipeline built more quickly and more efficiently.
He said the company plans to run newspaper ads of its own this week. TransCanada said its proposal would be more advantageous for producers because it would offer better integration with its existing system and create economies of scale.
The firm estimates producers would save $10-billion in tolls over 15 years if gas from Alaska helps to keep its existing pipeline system full. At the moment, TransCanada's grid has unused capacity that is expected to increase as gas production from Western Canada continues to decline.
"Alaska [would be] a four-billion-cubic-feet-a-day shot in the arm that enable us to optimize all the gas that flows out of Western Canada," Mr. Kvisle said.
The company's offering was a clear attempt to line up producer support, which at this point is on Enbridge's side, even though Enbridge doesn't have a producer deal in place. TransCanada has historically had tense relations with the producer community because of disputes over tolls.
John Carruthers, vice-president of gas development at Enbridge, said the same or better toll benefits can be achieved under an Enbridge plan.
"We would see there is a lot more benefit to existing producers and chemical processors through a new application," Mr. Carruthers said.
Conflicting views on the NPA and other delays could drag out a political decision, Mr. Kvisle said, putting the whole project at risk by favouring a "suboptimal project" like the liquefaction of Alaska gas for transportation by tanker, rather than moving it to the U.S. by pipeline, he said.
"The worst case for Canada is that the pipeline through Canada does not get built at all," Mr. Kvisle said.
Mr. Kvisle would not say whether TransCanada would mount a legal challenge to defend its interests if Ottawa opens the project to competition.
"It's up to the government of Canada and we'll of course respect the laws of Canada."
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