NORTH AMERICA: Alaska to Consider TransCanada Gas Pipeline Proposal

Alaska Governor Sarah Palin will consider TransCanada Corp.'s proposal to build a $26.6 billion pipeline that would jump-start production of natural gas from the Arctic's North Slope after decades of delays.

Five companies applied last year under a new state law to build a pipeline that links Alaska's gas fields to markets. Calgary-based TransCanada's proposal is the only one that meets the state's requirements for permitting, financing and construction, Palin said today. The conduit could start in 2017.

``We have long stated that it only takes one good application,'' Palin, 43, said in an e-mailed statement. ``We're thrilled to have a project sponsor willing to build a pipeline on terms that benefit all Alaskans.''

Companies are reviving plans to tap gas deposits discovered in Alaska decades ago as gains in demand boost prices for the heating and power-plant fuel and fields that are cheaper to develop become scarce. North Slope gas reserves, estimated at 35 trillion cubic feet by the state, are currently inaccessible as there's no way to get the fuel to consumers.

TransCanada's pipeline would ship 4.5 billion cubic feet of gas a day and stretch over 1,700 miles through Canada to U.S. markets, according to an application on the state's Web site. Capacity could be expanded to 5.9 billion cubic feet a day.

The pre-construction stage of the project would start in the second quarter of this year and may extend to August 2013 as the company seeks regulatory approval and works on the design, TransCanada said. If construction starts in 2013, commercial operations may begin November 2017, according to the document.

`Lifesaver' Line
The line is ``a lifesaver'' for TransCanada because shipments and earnings on its main Canadian system have been falling for years because of declining output in western provinces, said Daniel Shteyn, a Montreal analyst for Desjardins Securities Inc., who rates the shares ``buy'' and owns none.

The project would ``represent an earnings boost, not only through the pipeline itself, but also from rejuvenating their existing Canadian mainline,'' he said in a telephone interview.

TransCanada's third-quarter profit rose 11 percent to C$324 million ($323 million), boosted by the $3.4 billion acquisition of U.S. assets from El Paso Corp., the company said Oct. 30.

Short-listing the application doesn't mean TransCanada is already the ``exclusive licensee,'' Palin said today at a briefing in Anchorage that was accessible by conference call.

The public will have 60 days to comment on the proposal, which includes a state-required commitment to expand the pipeline and provide Alaskans access to the gas. The state will then make a recommendation to lawmakers and seek their approval.

Other Bids
Palin said Nov. 30 TransCanada, China Petrochemical Corp., the Alaska Gasline Port Authority, a venture of three municipalities, the government-owned Alaska Natural Gas Development Authority, and Alaska-registered AEnergia LLC submitted bids under the state's new law.

A proposal submitted by ConocoPhillips, the third-largest U.S. oil company, won't be considered as it doesn't meet the state's requirements, Palin has said. She hasn't ruled out that ConocoPhillips could participate in a project.

``Conoco's plan, we continue to look at but it's not being considered'' as part of the legislative process, Palin said on the call.

ConocoPhillips proposed a pipeline that would ship 4 billion cubic feet of gas a day and could cost $25 billion to $42 billion. The best estimate is $30 billion, it said.

Agreeing with the state on financial terms is a ``critical component'' for the project, ConocoPhillips has said.

Pipeline Partners
TransCanada said it may allow potential gas producers, such as ConocoPhillips, BP Plc and Exxon Mobil Corp., to buy a stake in its pipeline.

ConocoPhillips said in its Nov. 30 application it may cooperate with other pipeline investors.

``The ConocoPhillips proposal has the best chance of leading to a successful gas pipeline project,'' spokeswoman Natalie Knox Lowman said today in a telephone interview. ``We are willing to work with a third-party pipeline company. There is more than one.''

She declined to say whether ConocoPhillips is in talks with TransCanada.

A subsidiary of TransCanada has held the rights to build the Canadian segment of the line since the 1970s, when rising costs and falling gas prices shelved the project. Exxon Mobil and Chevron Corp. are the two largest U.S. oil companies.

TransCanada fell 30 cents to C$40.30 on the Toronto Stock Exchange. ConocoPhillips fell $2.69, or 3.1 percent, to $85.56 in New York Stock Exchange composite trading.

Via: Bloomberg | by Sonja Franklin and Ian McKinnon

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