Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: Snowshoe who wrote (310119)	6/15/2009 8:36:23 PM
From: Brumar89	Read Replies (2) \| Respond to of 793964

And what has changed since 2006? One thing is it looks like coal (and as long as Demcrats are in charge, nuclear) are going to be in long term decline as power sources. Which leaves mostly natural gas as a new source. Even mandating and subsidizing more wind and solar development means more natural gas being burned as a backup for those. Furthermore, it looks like there is going to be more and more protmotion of alternatively fueled vehicles. Which may mean natural gas vehicles or electical vehicles powered ultimately by natural gas. Yes, I expect Palin to adjust Alaska taxes to reality over time too. Two years ago, oil producing states (both foreign and US) could afford to be more militant and demanding. Another change since 2006. Also I see the Alaskan and Canadian pipelines to be in a race. That the Alaskan gasline seems to be shaping up as the winner is another change from two years ago. I reference again the Vancouver Globe and Mail article.

To: Snowshoe who wrote (310119)	6/16/2009 1:10:08 PM
From: Brumar89	Read Replies (1) \| Respond to of 793964

Presumably you saw this ADN piece Our view: Exxon and the gas line 6/15/2009 Anchorage Daily News Exxon and TransCanada have announced a partnership to continue preliminary work on a possible gas pipeline from the North Slope. Naturally, Alaskans are wondering what this development means. Here's our best assessment: Does this mean Exxon and TransCanada are actually going to build a gas line? No, that's still a long way off. This step is a partnership to do the planning that's needed to hold an "open season" for the project next year. ("Open season" is a formal process where the sponsors find out who is interested in shipping gas through the line.) To attract shippers in the open season, the project needs the best possible cost estimates so shippers will know what rates they have to pay. A final decision on building a gas line won't come for several years, when corporate boards agree to commit billions of dollars either to gas shipping contracts or to actual construction of a line. Then why is this news such a big deal? For the first time, one of the Big Three gas holders on the North Slope says it's willing to work within the rules the state established for the project. Exxon apparently sees that following the state's preferred path will be the quickest way to get a gas line built. Having Exxon aboard means the project will have better cost estimates to use in attracting shippers. The gas line, while still a long way off, is moving forward with the world's biggest corporation aboard. Won't the state be subsidizing Exxon for work it would do anyway? Exxon can collect some state subsidy, but no, the subsidy is not for work the company would be doing anyway. It's true, Exxon can get back 50 cents from the state for every dollar it spends in this arrangement with TransCanada. However, in partnering with TransCanada, Exxon is working on the project the state wants: a gas pipeline that's open to new shippers, on terms that keep shipping costs affordable to newcomers. Exxon had other options -- it could have pursued its own project, or tried to join the BP-Conoco gas line venture known as Denali. Both those tracks could produce a gas line with more restrictive conditions than the state wants. That would give the big North Slope gas holders more room to discourage future competition by charging newcomers significantly higher shipping rates. That type of gas line would discourage gas exploration and stifle future growth of an industry the state urgently needs to fill the gap created by our steadily shrinking oil industry. What's in this deal for TransCanada? TransCanada gets things of real value. Exxon will share previous field studies covering most of the U.S. corridor for the gas line. That information, including soil conditions and geotechnical data, is especially valuable for designing the gas line and preparing solid cost estimates. If the partnership falls apart, TransCanada will be able to keep the information -- a sign Exxon is serious about its commitment. Also, Exxon will take the lead on planning the multibillion-dollar gas treatment plant, a complicated and expensive element that falls outside TransCanada's core area of expertise. Will this move allow Exxon to hijack the process and derail future progress? No. There is absolutely no change in the commitments and timelines the state demanded in return for subsidizing some of TransCanada's work. If Exxon starts to stall the process, TransCanada has the right to send Exxon packing. What does this mean for the competing project being pursued by BP and Conoco? BP and Conoco have to ask themselves whether it's worth spending up to $600 million to advance a competing project. Neither has as much expertise building gas pipelines as TransCanada -- they are basically starting a hugely expensive and complicated project from scratch. Neither company has as much financing horsepower as Exxon. Continuing on their own also puts them at odds with the state, which reduces the chances their project will succeed. TransCanada has repeatedly said it's willing to let gas shippers buy ownership shares of its project. Now that Exxon is aiming to buy a share of the project, BP and Conoco might reconsider whether they should follow a similar course. Exxon, like Conoco and BP, still talks about wanting the state to ensure stable fiscal terms for a gas line. Won't the Legislature have to pass a new tax law to give the gas holders what they want? Not based on what we know now. The Palin administration is adamant that the project is still very profitable for the gas holders and TransCanada under existing state tax terms. If there are going to be any tax changes, the state will demand to see why they're necessary and hear what the state gets in return (such as a firm guarantee that construction will start). Under existing state law, if gas holders sign up during the first open season, the state will lock in the prevailing tax terms for the first 10 years that the gas flows through the line. However, a future Legislature and governor could possibly renege on that pledge. (It's not written into a binding, legally enforceable contract.) State Revenue Commissioner Pat Galvin says the state is willing to pursue a change that turns the existing fiscal stability promise into a contractually enforceable commitment. But based on what's known today, he says, any other change in fiscal terms is going to be a tough sell, given how profitable the project will be. BOTTOM LINE: There's still no guarantee a North Slope gas line will be built, but it's looking better than it ever has before.