Alaskan Pipeline Project

FERC officials say they aren’t pressuring the competing Denali and TransCanada Alaskan pipeline projects to merge. But the two projects – one already in the pre filing process – are heading toward submitting construction applications to FERC at roughly the same time in 2011 or 2012, depending on who one talks to, in what would be a regulatory clash and crash that the agency hopes to avoid. Congress is also pressuring the two Alaskan gas transportation contestants, though very subtly. Legislation the House passed in late September, whose primary purpose was extending the congressional ban on offshore oil and gas drilling, included a symbolic amendment meant to strengthen the president’s hand in twisting the arms of Denali and TransCanada/Alaska to combine their efforts.

In an interview, Tony Palmer, vice president, Alaska Development, TransCanada, says his company continues to talk with BP and ConocoPhillips, the Denali partners, about taking an equity interest in the TC pipeline, whose proposed route is essentially the same as Denali’s. “No one has slammed the door,” he states, noting that TransCanada will not make hard and fast offers to the two companies, plus ExxonMobil and other potential shippers, until the start of the open season in spring 2010.

Palmer says FERC has publicly encouraged the two Alaskan pipeline bidders to get together. “That would be positive if it occurs,” adds Palmer. “We favor shippers joining our project.”

Scott Jepsen, spokesman for Denali, is a bit more restrained. “The owners of Denalihave stated that they will consider participation by other parties that add value and reduce risk,” Jepsen states.

Denali has a bit of a head start with FERC, which will approve only one of the two projects. FERC approved Denali’s entry into the pre filing process in June. Palmer notes, however, that FERC granted TC a number of exemptions when approving its “very short” pre filing application, which, he implies, was less than complete. Tamara Young Allen, a FERC spokeswoman, acknowledges that FERC let TC slide on a number of pre filing requirements such as providing a list of landowners along the project’s route.

Palmer says TransCanada wants to be fully ready to enter pre filing, and will file its application after its open season next spring. Post open season is when pre filing activities normally begin, he adds. Palmer states that TC expects to file a construction application in 2012. In the FERC letter to Denali approving its pre filing application, the agency noted that Denali plans to file its construction application in 2011. So it is not clear, despite FERC’s warnings, that it will have to consider the two applications simultaneously.

Rather, FERC may be concerned that it will have to act on Denali’s application without the benefit of having TC’s to compare it to. Conversely, Denali may be in a bit of a rush since the state of Alaska has blessed the TransCanada project, certifying it under the state’s Alaska Gas Line Inducement Act. It not only receives the political imprimatur of the state, but also $500 million in state funds for use during the pre filing process.

FERC stated in its “Sixth Report to Congress on the Progress Made in Licensing and Constructing the Alaska Natural Gas Pipeline,” published at the end of August, that Alaska’s blessing of the TransCanada proposal would not give TC an advantage as far as FERC’s consideration of a construction certificate, which, again, will only be granted to one of the bidders. The report’s conclusion noted: “It is not unusual or detrimental at this stage that two projects are preceding forward.” But it went on to say, “We continue to seriously caution that reviewing multiple projects throughout the complete federal regulatory process would greatly challenge the Commission staff, the other agencies on the federal interagency team, and state agencies. We believe it to be in the public interest to avoid the consequences of a prolonged, duplicative regulatory review in a competitive situation . . .”

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