Obama’s pipeline endorsement downplayed

It made American President Barack Obama's list of priorities, but one industry watcher doubts a new administration in Washington can bring the Alaska gas pipeline to fruition any faster.

It made American President Barack Obama’s list of priorities, but one industry watcher doubts a new administration in Washington can bring the Alaska gas pipeline to fruition any faster.

“That’s what Canada said about the Mackenzie gas project 15 years ago, and we’ve all seen how well that’s worked out,” said Dale Lunan, editor of Oilweek magazine based in Calgary.

Delays in hearings for the Mackenzie gas pipeline - a 1,220-km buried line proposed to run through the Northwest Territories - has stalled regulatory approval for a project one-third the magnitude of the proposed Alaska venture.

Shortly after Obama’s Jan. 20 inauguration, “Prioritiz(ing) the construction of the Alaska natural gas pipeline” officially became part of his Energy and the Environment agenda.

“I guess if Washington says, ‘Let’s do it,’ that might provide the impetus,” Lunan said

“But if they get bogged down in a Mackenzie-style review, complicated by the fact it’s a transnational (project), ...depending on what they determine is the regulatory path, it could take at least 10 more years.”

In August 2008, Alaska Gov. Sarah Palin signed a bill granting TransCanada an exclusive licence to build a 2,700-km pipeline from Prudhoe Bay, Alaska to northern Alberta.

While the deal came with $500 million in state financing, the Calgary-based energy transmission giant will have to contend with ConocoPhillips and BP, who have joined forces on the competing Denali project.

“If all things go perfectly, gas could be flowing in 10 years,” Dave MacDowell, Denali spokesman, told the Star last week.

But MacDowell said Denali’s eye is on luring gas producers interested in a share of the Alaska pipeline’s four-billion cubic feet/per day transmission capacity.

“We can’t really talk about or speculate on the new administration’s priorities,” MacDowell said.

“We are focused on developing our (project plan) for the open season in 2010, to provide a high-quality cost estimate to give potential customers.”

MacDowell said the marketplace will decide which of the competing $30-billion projects succeed, by way of long-term shipping commitments.

“At the end of the day, for the project to move forward, of course the economics have to work,” MacDowell added.

Last week, the price of natural gas bottomed out at $4.50 per million BTU, roughly a third of where prices were a year ago.

But TransCanada vice-president Tony Palmer assured Alaska lawmakers at a presentation to the state’s House Resources Committee Jan. 26 that his company is proceeding toward open season and would not be swayed by short-term prices.

“This project cannot swing with the wind of gas prices month by month,” Palmer is quoted by The Associated Press.

Despite Obama pointing a spotlight on the Alaska pipeline, Palmer’s confidence in TransCanada’s chances appears more bolstered with the Alaska government onside and Canadian legislation that favours the Calgary-based firm.

“We’re very pleased there’s a treaty between the two countries (and) the subsequent Northern Pipeline Act and since we already hold a National Energy Board certificate (on the right of way through Yukon), that will expedite the project,” Palmer told the Star.

Passed in 1978, the Northern Pipeline Act sets out the terms and conditions for an Alaska Highway gas pipeline and provides Foothills Ltd. (bought by TransCanada in 2003), the right to construct the project.

However, this bit of northern resources history has not deterred Denali or its backers - ConocoPhillips and BP - who plan to spend more than $200 million to craft a competing bid against TransCanada’s.

As well, industry watchers and players question the validity of a 30-year-old act on a mammoth 21st-century project.

Back in Calgary, Lunan believes the political landscape bodes well for TransCanada, but hedged his bets on who will ultimately prevail.

“I would suspect the TransCanada consortium is probably going to get the nod; that’s what Miss Palin has expressed as her major interest,” Lunan said.

“I know that TransCanada considers themselves ... the go to people for it, but the whole thing may end up in court or in the (Alaska) state legislature, for a final determination.”