TransCanada, Exxon Mobil deal on Alaska pipeline imminent

Yereth Rosen, June 11, 2009, Reuters--Alaska officials said Thursday an announcement was imminent on a deal that would have energy giant Exxon Mobil Corp team up with Calgary-based TransCanada Corp to design and possibly build a long-sought Alaska natural gas pipeline.

An announcement by the companies and Gov. Sarah Palin was expected as early as Thursday morning, said State Sen. Lesil McGuire, an Anchorage Republican who chairs the Senate Energy Committee and co-chairs the Senate Natural Resources Committee. However, details were not clear, she said.

"It could be Friday. It could be next week," McGuire said.

State Sen. Bill Wielechowski, an Anchorage Democrat who co-chairs the resources committee with McGuire, said rumors have been swirling about a pending deal between Exxon and TransCanada, which holds a state license to build the project.

Officials at Exxon Mobil and TransCanada were not immediately available for comment.

If a deal is struck, it would be a good sign for the project because it brings one of the major North Slope oil producers into the planning process, he said.

Already, the other two major producers, BP and ConocoPhillips, are pursuing a competing proposal.

"If there is a proposed Exxon-TransCanada deal, I do think that's a positive step," Wielechowski said.

The project, expected to cost at least $30 billion, would allow North Slope oil producers to sell natural gas that is currently stranded within the Arctic Alaska oil fields. The pipeline would run about 1,700 miles from Prudhoe Bay to an existing pipeline hub in Alberta, and would deliver 4 billion to 4.5 billion cubic feet a day.

Government and industry officials have been trying for three decades to make the Alaska natural gas pipeline a reality, but poor economics have long precluded the project.

TransCanada last year was granted a state license for the pipeline under a competitive bidding process championed by Palin.

The bidding process, under a Palin-sponsored law called the Alaska Gasline Inducement Act, offered a $500 million state subsidy and a pledge that the state would not negotiate with any competitors as long as a series of state-sanction commitments were met.

Under terms of the license, TransCanada will hold an open season next year seeking pledges from potential natural-gas shippers.

The BP-ConocoPhillips project, called "Denali," has been designed outside of the AGIA process. Like TransCanada, the Denali group intends to formally solicit customers next year.

The North Slope holds known reserves of about 35 trillion cubic feet, the largest proven but untapped conventional natural gas reserves in the nation.

In the 32 years that crude oil has flowed down the trans-Alaska oil pipeline for shipment to Lower 48 refineries, there has never been a method to ship that resource.

Wielechowski said an Exxon commitment to the gas pipeline would validate the competitive bidding process pursued by Palin and embraced by most legislators.