TransCanada, BP differ on Alaska pipeline role
Act confers right to build in Canada, TransCanada says
canada.com
Claudia Cattaneo, Financial Post
Published: Saturday, June 24, 2006
CALGARY - There can be a role for TransCanada Corp. in the giant Alaska gas pipeline -- but not the one the Canadian pipeline giant is pushing for, said the head of BP PLC's Canadian subsidiary.
Brian Frank, CEO of BP Canada Energy Co., said discussions are underway with the pipeline company to help mitigate the project's huge risks or to add value, particularly because its price tag has undoubtedly escalated beyond the US$20-billion estimate made in 2001.
But BP, along with partners Exxon Mobil Corp. and ConocoPhillips, don't agree with TransCanada, which claims it has the right to build the Canadian portion because it received permits 30 years ago under the Northern Pipeline Act, he said.
"We are talking to them as a commercial counterparty," Mr. Frank said in an interview. "The discussion is around 'What can we do that benefits you, and what can you do that benefits us?' We are engaged in conversations to see what they can do to enhance the probability of the project going forward."
Alaska producers are also in talks with Enbridge Inc., TransCanada's Canadian rival, and others, he said.
TransCanada expects to have a lead role in the project and has been lobbying Ottawa to reaffirm the NPA. TransCanada's CEO, Hal Kvisle, said the NPA would help producers by expediting the regulatory process because under that agency, the project has already been approved.
Mr. Frank said producers insist the project must be regulated by Canada's top energy regulator, the National Energy Board, and have relayed their position to Jim Prentice, the federal minister responsible for deciding which regulatory process will prevail.
"TransCanada remains willing to collaborate with the Alaska North Slope producers, but will do so in the context of our existing rights and assets, including the NPA and the treaty with the U.S. governing the transit of Alaskan gas through Canada," said TransCanada's Jennifer Varey. "The NPA remains fully in force and effect, providing significant benefits to Canada, and that includes Canadian ownership of the Canadian section."
Mr. Prentice has said Ottawa plans to clarify where it stands quickly, but only after it has made more urgent decisions on the rival Mackenzie Gas Project, which would carry stranded Canadian Arctic gas to Alberta.
"Our view is this is unprecedented investment and risk and all of the risk of this project, at the end of the day, is going to held by the producers," Mr. Frank said.
"The NPA certificated a specific project and doesn't allow the market to work. This Act was passed in 1978. Since then we had aboriginal rights constitutionally entrenched, we had market deregulation, free trade, a fundamental overhaul of our environmental policies and regulations."
Mr. Frank said the discussions with TransCanada are preliminary because producers are waiting to find out if the Alaska legislature will back a fiscal deal to underpin the project.
The project's proponents have not looked in detail into cost increases, he said.
"It's fair to say that the project has been subject to the same cost and inflationary pressures that other parts of the industry have been. A quarter of the roughly 25% of the original cost estimate is steel, and it's gone up a lot."
If it moves forward, the project will result in thousands of new jobs in three major centres: Calgary, Anchorage and Houston.
BP, which employs 1,400 in Canada and is on an aggressive hiring spree, will look globally to fill some of those positions, given Alberta's tight labour market, he said.
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