State finds TransCanada project economical, likely to succeed
Published Wednesday, May 28, 2008
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Stumble It!JUNEAU — Gov. Sarah Palin’s gas line team released its official findings and determination on the TransCanada gas pipeline proposal on Tuesday, providing the state’s first detailed assessment of how much money the state and others would make from the project and how likely the project is to succeed.
According to the findings, the state could expect to bring in more than $260 billion during the next 25 years through taxes and royalty payments resulting from the gas line. Major North Slope producers would also see hefty cash flow from the deal, receiving $147 billion during the same period.
When the time value of money — the fact that a dollar received today is worth more than a dollar received 10 years from now — is taken into account, the project is still profitable for the state and the producers, even if the size of the project is smaller than expected and construction costs are higher, according to the findings.
The findings claim that it would take a “perfect storm” of bad scenarios to make the project uneconomic for the producers.
The findings also state there is a “reasonable likelihood” that TransCanada will be able to overcome the major hurdles to the project, including getting the necessary commitments from North Slope gas producers to use the pipe.
“The potential benefits to be gained from the TC Alaska project, and the risks to all of the parties of not taking reasonable actions to make the project a success, are simply too large for the parties to allow the project to fail,” it reads.
The findings claim the major producers would have strong economic incentives to join the project and would be legally obligated to use the pipeline even if they were reluctant to.
Steve Rinehart, a spokesman for BP, one of the major North Slope producers, said it was too early for his company to comment on the state’s economic assessment.
The findings and determination cover more than 300 pages, and accompanying documents span another 2,000 pages, according to Joe Balash, a special assistant to the governor. They include an in-depth analysis of the TransCanada proposal and compare it against the competing pipeline proposal by two North Slope producers and projects using liquefied natural gas, or LNG.
The release of the document follows an announcement last week by Palin that she would seek legislative approval to issue an exclusive state license to TransCanada. The Canadian pipeline company’s application under the Alaska Gasline Inducement Act was the only one deemed complete by the administration.
The Legislature is scheduled to consider the proposal during a special legislative session starting June 3 in Juneau.
Lawmakers reached Tuesday said they hadn’t had time to review the findings but looked forward to learning more at a series of presentations by the administration and hired consultants starting today in Anchorage.
The decision of whether to issue a license to TransCanada — and allow a $500 million state subsidy — is complicated by the pipeline project being pursued by North Slope producers ConocoPhillips and BP outside of the AGIA process.
The producers argue their project can be completed sooner and would save the state from having to provide the $500 million subsidy.
But in its findings and supporting documents, Palin’s administration argues that only a pipeline built under AGIA would ensure the state’s interests were met.
An analysis by the administrative consultant Black & Veatch states that the producers’ pursuit of their own “Denali” pipeline project could undermine a TransCanada project, but recommends issuing a license to TransCanada as a way of encouraging collaboration between the companies.
“TransCanada’s prospects for success and the state’s reasons for proceeding with AGIA at this point are based on the expectation that TransCanada and Denali will eventually merge into a ‘settlement’ project,” it reads.
The report adds that for such an agreement to happen, “AGIA must proceed by awarding a license.”
Balash said the administration considers a collaboration under AGIA “certainly one of the possible scenarios.”
BP’s Rinehart said his company is willing to “engage with third parties who could bring value to the project,” but he refused to say whether BP was considering a partnership with TransCanada under the AGIA process or only as part of the Denali project.
Sen. Gene Therriault, R-North Pole, said he saw a partnership as the best option because it would resolve the concern that the major producers would boycott a TransCanada pipeline.
“If keeping TransCanada in the game ultimately forces or promotes a collaboration,” he said, “... then that’s a win for the state.”
Community Discussion
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Questions that have not been addressed:
1. What is the total cost to Fairbanks if we have to wait until 2020 for gas as the multinationals and TC indicate would be likely with their schemes?
2. Would we jeopardize losing a major military base due to massive increased costs for energy and no natural gas availability until 2020? Doesn't Ft. Greely run their power plant with fuel oil? Didn't USAF officials cite the high cost of operating Eielson as a major justification for their recommendation to close Eielson? Have we already forgotten about Eielson after BRAC gave us a reprieve?
3. If crude oil goes to $150-$200 dollars per barrel, what happens to most Fairbanks residents when fuel oil climbs to $7.00- $8.00 dollars per gallon? Will that crash our economy? Who will be able to afford electricity if the rates rise to over 30 cents per kwh? Will we lose most residents living on a fixed income?
4. If the state has massive surpluses that could more than pay for the gasline from this, and last, year, why don't they build the gasline? Wouldn't Fairbanks be better off with gas in 2012 than in 2020?
5. How bad will the air quality of Fairbanks become in future winters as many more people burn wood, plastic, waste oil, and tire scraps to keep warm?
6. Has Juneau forgotten about Fairbanks? We know that they have forgotten about the rural areas. Aren't many villages paying about $8.00 for fuel oil now?
I wouldn't be at all surprised if we end up seeing a compromise plan that results in a Y-line flowing to both Canada and the Anchorage area. I wonder if the Denali project could piggyback on the TransCanada license if TransCanada were able to come to an agreement, somehow. It makes sense in my mind, at least -- TC would get the gas to its infrastructure Outside, and BP/CP would be able to sell a portion overseas via the Trans-Alaska route.
As the old saying goes, after almost 20 years as a resident, I'll believe it with I see it.
The Newsminer is doing the community a disservice by not reporting on Tom Irwin's comments regarding the Port Authority's application and project yesterday at the Carlson Center.
I would encourage people to take a look at the findings in the report for AGIA, on the web at Office of the Governor. It will become apparent that the experts that wrote this report know what they are talking about. I for one believe the Governor and her staff worked on behalf of all the people of Alaska to develop guidelines that will eventually be of great value to Alaskans. based on the LNG portion, it will become clear that the AGPA had duped the people of Fairbanks regarding the LNG project ( check the parts on LNG permits and shipping to China).
5050 Fairbanks has not been forgotten, nor is it being treated like a "special, spoiled child." From the smallest village to the largest city all Alaskan are included and will benefit from the plan. Your constant demand that a pipeline to Fairbanks be built yesterday has nothing to do with the needs of all Alaskans. Exactly how would this pipeline paid with State money help someone in Kate, Halibut Cove, Dutch Harbor, Unalaska, etc. This doom and gloom outlook you are now pushing on people that Fairbanks will die if not saved by the the State spending billions on Fairbank's own gasline is ridiculous. First you gave the people a false sense of Hope and now you are trying to destory them with fear. People check out the report and make your own decision.
50/50 - Does Fairbanks matter to the legislature? NO
I was a strong supporter of the All Alaska Gasline, but after careful review of the AGIA findings now think that TC is the way to go. The gasline is a long-term energy solution and Fairbanks will be gone if we wait for cheap gas to power our lives. Hopefully we will be able to find a way to make it through the next 15 years so we can see the gasline come online.
There you go again. Just like Jimmy Carter tried in the 70s. It failed then and will fail now, for the same reason. Politics. While we are seizing Canadian fishing boats for crossing invisible borders in the ocean, we're going to give them control of our natural resources? I don't think so.
The State should do a complete investigation of the Alaska Gas Line Port Authority, especially it's connection with Walter Hickel, Yukon Pacific, and Sempra. Don't forget one of your legislators Ramas went off to China with Hickel a few weeks ago. I wonder what he will get in return for a vote. ArcticAir fill us in on what was said about the Port Authority.
Why make a comment that your find everything to be a point of criticizing. It's not like a oil that was needed but still it's a by product from oil where it's naturally found with oil thats avalibe that's not being used. But, still 50/50 doesn't seem to look at things 50/50 seems more like 100 percent environmentalists.
After having read the report on the TransCanada for AGIA I'm wondering if anyone has information on the following item in the Governor's press release:
Spur lines to Alaskans. Committing to five off-take points along the main line, the TC Alaska project also offers the potential for construction of spur lines that will make natural gas available as a source of energy to communities throughout the state.
I'm a little confused where it indicates the "potential for 5 spur lines". Can anyone tell me what will happen if they decide not to build the spur lines? How will Fairbanks be impacted if they do not? If oil does go to $200 or more a barrel I'm truly wondering how we will make it?
I'm for the TC project as long as all Alaska's will receive the gas and the spur lines are built, not maybe! I trust Governor Palin, but that little item I have pointed out does bother me a little.
If I have not seen the true picture I hope someone can tell me what I'm missing. I already know no one can trust the big 3 to come through, or they already would be building the line.
Narcissus staring in the Pond..
..doesn't realize it's Quicksand.
I wonder how long it will take for TransCanada to build a LNG export terminal at Prince Rupert for exporting Alaskan-LNG to China???
..maybe it will happen quicker now that Alaskans have paid them a half-billion to "hook-up".
"Perfect Storm" ??
Keep a very close eye on global steel markets.
http://www.ibtimes.com/articles/20080526...
Keep a very close eye on emerging technologies-->
http://www.globalresourcecorp.com/Applic...
Keep a close eye on other perfect storms brewing...
http://www.huffingtonpost.com/2008/05/27...
===
yo, 5050....
I agree with all yer points today, except #2.
About the only real-good the military has done for Alaska is build the AlcanHiway and kick the Jap Imperial Army off Attu&Kiska.
My first few hours of breathing the Wild Alaskan Air was tainted with Sarin-Gas and Tularemia, courtesy of Ft.Greely at Gerstle river.
[did I ever petition for compensation?..heck no]
http://www.akaction.net/pages/critical/g...
Maybe the proposed gas-pipeline activity in the area near the Gerstle River Test Site and several other faintly-remembered areas of military contamination between Fairbanks and Northway will finally be uncovered with Raman-Spectroscopy field environmental test equipment.
So, is the State of Alaska actually paying for de-facto clean-up of Army contamination by contracting the Canadians?
It'll be interesting to see who keels over dead at Gerstle next year...(;-P)
.....flash/rumble
Ok, bottom line...how will Fairbanks be affected? Will we see some of the ecinomical pluses like we did when the TransAlaska Pipeline came through? Or are we just shadow boxing?
I know my family (immediate and so on) can't afford any more of the increases that we are facing.
Like my Father in Law says, Fairbanks will be a ghost town before long.
Remember that all of this just takes it to an open season. It will then be determined who will ship and who will not. Fairbanks, even if there is a spur line, it will be up to a company to come forward and build the intra structure to deliver gas to homes and business. The current 1,000 homes and business who are on natural gas in Fairbanks could not support the expense of the intra structure. Has anyone estimated cost for intra structure based on return profit. The cost many eventually make people in Fairbanks pay the highest cost for natural gas in the world. Maybe this is why your borough is looking at sin gas, which will only cost a few billion to build a plant.
Fairbanks does anyone really believe your community will ever see cheap fuel without a major crash of the oil futures market. At least in the villages people are realistic and for those who cann't afford to live here, they are moving to Anchorage where energy is cheap. The hard question is can I afford to live here anymore? This question is asked by many people in the US today.
I have to believe that the natural gas, when it finally hits Fairbanks and the rest of the state wont be as cheap as everybody thinks. It might be, or it might not. It all depends on what the world price for it is. We will pay for it whatever it goes for in Chicago, or China. The only form of power we can produce that isn't tied to the world market is electric produced by wind, or more feasibly, gravity.
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