FERC Offers To Help Merge 2 Alaska Gas Pipeline Projects ________________________________________________________
money.cnn.com
August 29, 2008: 05:41 PM EST
SAN FRANCISCO -(Dow Jones)- The Federal Energy Regulatory Commission on Friday volunteered to help merge two competing Alaska natural gas pipeline projects into one.
TransCanada Corp. (TRP), with backing from the Alaska government, is planning to build a major natural gas pipeline from Alaska's North Slope to markets in Canada and the lower 48 states, while ConocoPhillips (COP) and BP PLC (BP) are proposing a similar project, minus the tax incentives and other inducements the state has pledged to TransCanada.
TransCanada agreed to terms requested by the state, such as rolled-in shipping rates, and competed for a chance to be selected as the developer of Alaska's natural gas pipeline. TransCanada's proposal was chosen by Gov. Sarah Palin and approved by the legislature as part of the state's Alaska Gasline Inducement Act.
Palin was named Friday as the vice presidential running mate of presumptive Republican presidential nominee John McCain.
BP and ConocoPhillips, along with ExxonMobil Corp. (XOM), control the bulk of oil and natural gas reserves on Alaska's North Slope. Exxon hasn't said which pipeline project it favors, although the company has said it's committed to participating in one.
In a report to the U.S. Congress on the progress of an Alaska natural gas pipeline, the FERC stated what has become a broad expectation: that the companies should work together on one pipeline project.
The FERC "may be the best forum" for the two competing projects and other interested parties "to work together...to move forward with a project of this magnitude," the agency said. Commissioners also noted that having to evaluate two, duplicate pipeline project applications would strain the agency's resources.
"The commission stands ready to do its part and reminds all stakeholders that construction and operation of an Alaska natural gas pipeline is the ultimate goal," the commission said.
TransCanada's project, estimated to cost between $26 billion and $30 billion, appears to have the biggest advantage, with a state guarantee for a 10-year production tax freeze for shippers. The Canadian company also has existing right-of-way permits throughout Canada.
The state offered the tax incentives and other support in return for agreement on terms such as financing mechanisms that would keep shipping rates down. Conoco and BP didn't participate in the competition for the incentives and state partnership.
Alaska's North Slope holds about 35 trillion cubic feet of known gas reserves, and the state estimates the area could have as much as 250 trillion cubic feet of undiscovered reserves.
The U.S. used about 23 trillion cubic feet of gas in 2007.
-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468; cassandra.sweet@ dowjones.com |
