ExxonMobil and TC Alaska — What does it really mean?

Recently, TransCanada and ExxonMobil made the announcement that the two companies would be working together on various aspects of the gas pipeline, with the aim of getting the project to the “open season” hurdle.

ExxonMobil will take the lead on the North Slope gas treatment plant, including design, engineering, cost estimates, etc. It will also share with TransCanada the approximately $120 million in feasibility studies ExxonMobil, BP and ConocoPhillips undertook in the late 1990s. TransCanada will continue to work on project engineering for the large-diameter pipeline that is its area of expertise.

I view the announcement as a positive step forward for the gas pipeline, even though some of Gov. Palin’s critics do not. One critic, for example, suggests that ExxonMobil is simply protecting its interests in the game and will not follow through to construction of the pipeline until it gets favorable fiscal and tax terms with the state. The suggestion is that ExxonMobil can now use TransCanada as its “front man” to negotiate fiscal terms with the state. However, regardless of the terms of its agreement with ExxonMobil, TransCanada is obligated through its AGIA license to advance the project through an open season and on to certification by the Federal Energy Regulatory Commission. In addition, TransCanada officials have stated on the record many times that they will not interfere with the state’s sovereign authority to determine fiscal tax terms. I have seen no indication they intend to break this commitment.

For months now, critics of the AGIA process have complained that TransCanada does not control any North Slope gas and does not have the financial ability to build this pipeline alone. Now, as TransCanada takes a step in the direction of partnering with a producer that does control a large portion of the North Slope natural gas and that has a very positive balance sheet, the naysayers criticize the forward movement they asked for.

The critics’ view is a cynical approach to the TransCanada-ExxonMobil announcement. I take a more positive view of it, recognizing the pipeline is a long-term project that can only happen through incremental steps, taken one at a time. Although no one is buying pipe by the mile yet, this is a step forward that can lead to a successful open season next year.

As TransCanada moves toward an open season next year, they continue to honor their pledge to work with the Alaska Port Authority in case world market forces call for our gas to be taken to tidewater for liquefaction and shipping to Pacific markets. I have continued to monitor the communications between the Port Authority and TransCanada to make sure the proper level of communication is taking place.

We have to always keep the end goal clear in our minds; that is, we have a tremendous, valuable resource of natural gas on the North Slope, clean energy that American consumers want and need. Even with the development of shale gas in the continental United States, Alaska is projected to contain a significant percent of the domestic long-term natural gas of North America. No doubt, the cost of building a gas pipeline to bring that resource to the market is high, but the cost will be amortized over many years.

Regarding the other major gas pipeline project — getting a spur or bullet line in place to bring natural gas to Alaska communities — Gov. Palin has directed former Commissioner Harry Noah to report his progress on a monthly basis to the Legislature. I am pleased with his work so far and look forward to these continuing updates. I believe there is merit in putting the pipeline along the Richardson Highway route, because it brings gas to more communities and would allow export of LNG via Valdez. The Alaska Natural Gas Development Authority recently agreed to assist in the efforts to compare a Richardson Highway route to a Parks Highway route. This will help to ensure that the comparison is done in a fair manner.

Sen. Gene Therriault, a Republican from North Pole, represents District F.