Alaska pipeline feud heats up between key players

The two main Alaska pipeline proponents on Tuesday continued to trade barbs over who will build the world's largest private construction project.


At an Arctic natural gas conference in Calgary, representatives from TransCanada Corp. and the Denali pipeline consortium took subtle jabs against each others' respective proposals at the Canadian Institutesponsored event.

Both Denali and TransCanada have submitted proposals to build the $30-billion link from Prudhoe Bay, Alaska, which would deliver about 3.5 billion cubic feet per day to southern markets starting around 2020.

TransCanada has teamed with Exxon Mobil Corp. -- the largest Alaska operator and largest oil company in the world -- to advance its proposal, which has the blessing of the state's Alaska Gasline Inducement Act, while Denali is a partnership between ConocoPhillips and BP, the two other main North Slope operators.

Even though it's outside the inducement act terms, Bob Bleaney, Denali's Canadian manager, compared the state sanction of TransCanada's proposal to granting a driver's licence.

"We think that (being outside the act) actually is a benefit for our project, because we're not tied to those particular conditions and we think we have a better opportunity to bring forward a successful project," Bleaney told the conference.

"No proponent has an exclusive right to build pipelines in the United States or Canada," he added.

That drew a swift rebuke from Tony Palmer, TransCanada's vice-president responsible for Alaskan development.

Palmer said TransCanada has been working to develop the project for more than 30 years and insisted that no pipeline will be built without the support of local and state governments, along with the main shippers. Working under the inducement-act process "is the best way" to move the project forward, he stated.

"I would suggest it's (inducement act support) a little more than that (a driver's licence)," he retorted. "No project goes forward in the pipeline business without three things in hand . . . you need an economic project, secondly, you need customers and, thirdly, you need to have regulatory approvals to build your pipeline. No commercial party can deliver this project alone."

Palmer said more than three decades of development work give TransCanada a competitive advantage in building and operating the line over its rivals. It already owns much of the right-of-way and in 1977 the Canadian and U.S. governments signed a transit treaty that formed the basis of the Northern Pipeline Act and granted TransCanada subsidiary Foothills Pipe Lines the right to operate the line.

In 2007, then-governor Sarah Palin introduced the gasline inducement act and, in 2008, TransCanada received state sanction to build the project.

Rather than sign on to the process, Conoco and BP forged ahead with their own proposal. Bleaney estimated that the Denali proponents have spent $130 million to date to advance their project, which will culminate in an open season later this year.

On Jan. 29, TransCanada launched its own open season to solicit potential customers, which will begin June 29. When it closes 90 days later, Palmer suggested the question of who will build the line will be answered.

In the meantime, he held out an olive branch for the Denali proponents to join or even take an equity stake in the TransCanada proposal. "We will continue to seek alignment with BP and Conoco."

Tom Barrett, the deputy federal co-ordinator for Alaska, said having two competitors to build the pipeline is unusual but not problematic.

"We treat them on a level playing field under federal law," he said.

Source: The Calgary Herald