Snowshoe, perhaps the AP article is biased against Palin, but from what I have read, this Transcanada deal does not appear to be in Alaska's interest--it is all fluff and pretense, with no substance. Transcanada has no commitments from any of the producing companies to actually use the pipeline, they have admitted that they cannot build it by themselves, and they are getting $500m from AK upfront simply to continue to explore the feasibility of building it and obtaining the necessary permits to do it. The person who was in charge of negotiating this deal worked for Transcanada in the past, and the companies that Transcanada is counting on to use the pipeline and to provide the financing for its construction, were the same companies that were virtually excluded from the bidding! This hardly gives them any incentives to cooperate with Transcanada. I cannot see where Transcanada is actually risking anything of their own upfront, and they apparently don't stand to lose anything even if the pipeline is never built. I'm sorry, but the deal reeks to me--it is lovely until you look at the details. Here is an opedit from Andrew Halcro from last May on the deal. He is also skeptical, as I'm sure you know.
ADN Op/Ed: Being Honest About AGIA
As the legislature heads into special session to consider signing an exclusive agreement with TransCanada, now is a good time to look at the facts so Alaskans won't be surprised at the outcome.
On April 29, 2007 the Anchorage Daily News ran an editorial that warned Alaskans about AGIA. “The governor's approach is politically popular but not commercially viable. Granting an exclusive license to a company to build the line -- when it can't afford to actually do the job on its own -- is gambling the state's future. That's a risk the state cannot afford.”
One year later, opining on the same AGIA plan they wrote; “TransCanada’s proposal sounds worthy of legislative support, but check the details to make sure.”
So how did we get from AGIA being a risk that the state can't afford to being worthy of legislative support? Especially given that the evidence is more clear today than ever before that this has been a process built on populist rhetoric while ignoring legal and financial realities.
"Unlike what we've heard in past with oil producers, TransCanada has made binding and enforceable commitments", Governor Sarah Palin stated last week about AGIA. But Alaskans need to ask; commitments for what?
In February while testifying in the Senate Resources Committee, TransCanada V/P Tony Palmer was asked about time lines for pipeline construction if they received the AGIA license. "We're not obliged to build the pipeline, it is not what AGIA requires", Palmer replied.
In fact the proposed AGIA contract with TransCanada is not a contract for actual construction of a pipeline. Rather, it would obligate the company only to seek permission from federal pipeline regulators to build a line.
In an interview with the Calgary Herald, Palmer admitted that TransCanada will not be able to build the pipeline without BP, Exxon and ConocoPhillips agreeing to pay for the construction costs.
However under AGIA, even if TransCanada fails to secure those commitments and thus have no chance of building the gas pipeline, they must continue down the path of trying to seek a permit to build the gas line from the Federal Energy Regulatory Commission.
In their recent report to Congress, FERC wrote about the prospect of TransCanada showing up at their door without customers: "this would be a less than desirable situation, given the considerable expenditures of financial and human resources required to complete the permitting process. Clearly, a proposed project which is backed by firm shipper commitments to transport natural gas supplies will have a greater chance of ultimate success."
To put this into perspective, FERC has never in their history granted a permit to a company that had no shipping commitments and no financing. But yet AGIA is betting that FERC will magically abandon this behavior on the largest and most expensive oil & gas project in the world. Meanwhile, taxpayers will be paying for 85% of the cost or commonly referred to as the $500 million inducement.
More importantly, once lawmakers sign up with TransCanada, the state will be prohibited from helping any competing project and will put itself at risk of triple damages if it does. So if the state decides that another project has a better chance of success, it will be an expensive divorce from a company that has been leveraging our money to fail. How is this promoting competition?
But most alarming is the fact that TransCanada is already on record, warning us about themselves.
On June 13, 2006 the company sent a letter to state officials warning them of independent pipeline proposals. "As you will recall, TransCanada has consistently advised your administration to be wary of independent pipeline proposals that would seek to develop a pipeline without the agreement and support of the ANS producers”, they wrote.
With AGIA, TransCanada has developed a pipeline proposal without the agreement and support of the ANS producers and now Alaskans are going to pay them to do what they've already warned us they can't.
This is Alaska's economic future; we should look past the populist rhetoric and think.
andrewhalcro.com |
