Does TransCanada have a conflict of interest?

 
Through Canada or to Valdez?

When former Governor Sarah Palin took office in 2007, she turned her back upon her campaign’s support of the all-Alaska natural gas pipeline to Valdez, even though she spoke in support of the project and stood with those who supported the project during the campaign. Supporters included former Governor Walter J. Hickel who was an outspoken proponent of the Valdez LNG project and a vocal opponent of Murkowski’s give away to Canada. Undoubtedly, her rising popularity was in no minor part due to her support of the all-Alaska natural gas pipeline to Valdez alternative to then Governor Frank Murkowski’s "contract" with Exxon, Mobil, and BP to build a 4.5bcf/da pipeline through Canada to the Midwest. Palin then beat former Governor Tony Knowles in the General Election in November, becoming the first woman governor of the State of Alaska.

By 2006, it was obvious to most Alaskans that then Gov. Murkowski’s pipeline contract was nothing but a promise by the oil companies to consider building a pipeline after much study and consideration. Exxon spoke of 2025 as the time frame for Alaska North Slope natural gas to move to market. Palin beat Murkowski in the August, 2006 Primary Election. Palin then won the November General election against former Governor Tony Knowles.

The die was cast for the Alaska Gasline Inducement Act.

Upon taking office, Sarah Palin literally reset on her support of the all-Alaska natural gas pipeline. Then Gov. Sarah Palin reappointed Tom Irwin as Dept. of Natural Resources Commissioner. Former Deputy Commissioner Marty Rutherford was also reappointed as Deputy Commissioner DNR. Both had been fired by by Gov. Frank Murkowski for disagreements regarding his actually having a contract with the oil companies to build a pipeline. However, both were firmly convinced that Alaska needed the large diameter 4.5 bcf/day pipeline through Canada to replace oil revenues from the Trans Alaska Pipeline Systems steadily declining volume transported to market. The North Slope oil production was about 700,000 barrels per day (bpd) at that time.

Irwin and Rutherford played a major role with legislative input in drafting AGIA. The project initially mirrored Murkowski’s project with one exception. The project did not rely solely upon the oil companies to build a gas pipeline. AGIA called for a competition with the best project as the winner. TransCanada became the sole competitor and was selected as the sole contractor under AGIA. The Alaska Gas Port Authority, a consortium of the cities of Fairbanks, Big Delta, and Valdez, submitted a proposal that was deemed late, incomplete and, therefore, not considered. By the gubernatorial election of 2010, the route was to the Alberta Hub, and not down through Alberta to the Midwest.

Since, AGPA has touted its route and LNG terminal plan as an alternative to AGIA. AGPA’s arguments have largely fell upon deaf ears in both the Paline/Parnell Administrations and the Legislature. Yet, the LNG market was demonstrating a major growth in Asia.

The contradiction in the volume of the planned pipeline projects, both Palin’s and Murkowski’s, was the Alaska Oil and Gas Conservation Commission limit of allowable production committed for export to market for North Slope Natural Gas. AGOCC set the amount at about 2-3bcf/da. This figure took into consideration the amount of natural gas necessary to keep the North Slope oil fields pressurized for continued production. Where Murkowski or Palin intended to come up with another 1.5 bcf/da between AGOCC’s limit and the 4.5 bcf/da capacity of their pipelines to Canada has to this day never been fully explained. Nor, has Governor Sean Parnell’s administration bothered to explain why his administration has continued to support TransCanada’s planned 4.5 bcf/da pipeline through Canada under AGIA in the face of the AGOCC’s limit on North Slope natural gas available for export.

In 2007, the Palin Administration announced the award of the AGIA contract to the sole applicant: TransCanada. TransCanada plans incorporated much of former Governor Murkowski’s pipeline. The volume was 4.5 bcf/da, the diameter a >=48 inch casing, the route through Canada to Alberta, then down to the Midwest. Later, TransCanada modifed its plan to use the Alberta Gas Hub distribution system to the U.S., thereby using existing pipelines to distribute gas to the U.S. from Canada. However, the price of the project continued to grow. The estimated cost for construction increased from $18B to over $40B by the gubernatorial election of 2010. From 2007 to today, little or no progress was made on the project. No permits for a route were issued in Canada or Alaska. No firm construction date was ever stated by TransCanada.

In 2008, Conoco and BP announced a competing natural gas pipeline project to Canada called Denali. The plan called for a 4.5 bcf/da natural gas pipeline to export North Slope natural gas to Canada. In May, 2011, Conoco and BP announced that the Denali project was no longer viable. About a week before that announcement, the Alaska president of Conoco’s Alaska operations stated that it was never the intention of Conoco or BP to bring Alaska’s North Slope to market, as they had intended to warehouse the natural gas indefinitely through reinjection back into the wells. Conoco and BP’s Denali proposal was intended to influence the course of Alaska’s legislative and gubernatorial policies pertaining to gas production and marketing of North Slope natural gas. The acts on the part of BP and Conoco amounted to fraud upon the State. The silence on the part of the Parnell Administration and the Legislature was deafening. (http://www.facebook.com/notes/alaskans-for-an-all-alaska-gasline/rebuttal-to-representative-les-garas-alaska-dispatch-opinion-piece-by-larry-wood/219621878075614)

On June 11, 2009, Exxon partnered with TransCanada. This partnership raised questions about the viability of just one producer on the North Slope participating in the project, when it was recognized that all three were necessary to any agreement to sell enough gas to move by pipeline. At that time, BP and Conoco were touting their "competing" Denali gasline project.

Since 1978, the completion of the TAPS oil pipeline, no discernible forward progress has been made towards actual construction of a natural gas pipeline in Alaska. Neither Denali’s nor TransCanada’s heavily publicized Open Seasons had produced any customers for their Alaska projects.

The reality of any natural gas pipeline from the North Slope, was that it took production from all three producers, Exxon, Conoco and BP, to provide sufficient natural gas to make a pipeline project viable. Further, the Point Thompson controversy between Exxon and the State also had to be settled.

The all-Alaska natural gas pipeline project first proposed by Yukon Pacific in the early 80s was for a 2.5 bcf/da pipeline from the North Slope to Valdez to be converted to LNG for export to the U.S. That was basically the same pipeline and volume intended in the plan voted on 2002. AGPA’s pipeline plan today is 3.0 bcf/da. Note that these volumes are within the AGOCC’s volume restrictions for North Slope gas export.

In mid-2011, Governor Sean Parnell finally awakened to the reality of the world LNG market. He suddenly decided that the only viable market for Alaska’s North Slope natural gas was as LNG to Asia. Since, he has tried to move AGIA in that direction. Under AGIA, TransCanada has the option to build a pipeline to a LNG terminus at Valdez for LNG export to market.

In October, 2011, Governor Sean Parnell called for a meeting with the North Slope oil producers to discuss a gasline and the LNG option. On January 6, 2012, Gov. Parnell met with Exxon’s CEO Rex Tillerson, BP Alaska’s CEO Bob Dudley, and Conoco’s Alaska operations CEO Jim Mulva in Anchorage. Gov. Parnell announced that he achieved a promise on the part of the producers to consider ways of getting Alaska’s North Slope gas to market. As promised, in a letter dated March 30, 2012, the oil companies outlined their intent to move forward on a gasline under AGIA. They updated their progress in another letter dated October 3, 2012. However, the progress was basically couched in terms declaring that ‘fiscal certainty’ was required for both a natural gas pipeline and any increase in oil production in Alaska. A position that the oil companies have steadfastly promoted for some time.

The first open season by TransCanada and Exxon ran from April 30-July 30, 2010. The second open season was conducted August 31-September 14, 2011. Both were apparently a bust with insufficient commitments to make any announcements regarding pipeline construction. Under AGIA, TransCanada has five years from the first open season before the project can be declared uneconomical and abandonment would be declared by either the State or TransCanada. (http://www.petroleumnews.com/pntruncate/285716809.shtml)

Today, Alaskans are still awaiting news of a natural gas pipeline project that will actually move North Slope natural gas to market.

Does TransCanada have a conflict of interest in its commitment to Kitimat?

Kitimat, British Columbia is the site of a proposed LNG terminal. In 2010, Apache Corp. announced the first agreements regarding LNG commitments with Korea. A 10 year commitment was made by Korea for Canadian LNG exported from Kitimat.

Since, the Kitmat development has expanded to include an additional LNG terminal and oil export capability to be built by a partnership lead by Shell to transport Alberta tar sands oil and LNG to Asia. The oil pipeline will be two parallel pipelines to be built by Enbridge. The pipelines would run 694 miles from Bruderheim, AB to Kitimat, B.C. with an estimated construction cost of $5.5B Canadian. Up to 1,000,000 barrels of crude per day would be transported by the pipelines.

TransCanada’s involvement and conflict of interest lies in its commitment to Shell to build a $4B (Canadian) 434 mile long natural gas pipeline from the B.C. shale gas fields to Kitimat. Kitmat’s LNG terminal will export approximately 1.2 bcf/da of LNG for Asian markets. Shell expects to export up to $10B in Canadian LNG to Asia through TransCanada’s pipeline. Shell is estimating a demand that will see up to 200 LNG tankers a year taking on LNG from Kitimat. The estimated completion date, given the environmental and indigenous lands rights of way issues, is expected by the end of the decade. The pipeline to be built by TransCanada is expected to measure over a meter (>39 inches) in diameter with an initial capacity of 1.7 bcf/da.

(http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/transcanada-wins-4-billion-pipeline-contract/article4231488/ ; http://www.transcanada.com/6054.html; http://www.coastalgaslink.com/ ; http://nwcoastenergynews.com/2012/06/05/2778/transcanada-build-shell-natural-gas-pipeline-kitimat/ )

Shell and its partners, Korean Gas, Mitsubishi, and PetroChina, are planning to build a separate LNG terminal from that planned by Apache Corp. back in 2010.

However, there may be a new wrench in the monkey works of the plans for any west coast LNG terminal, including Valdez.

TransCanada has an exclusive under AGIA. An exclusive normally implies a higher standard of commitment to the grantor than would an ordinary contract without an exclusive.

Given TransCanada’s commitment to Kitimat, should the State of Alaska move to declare breach to end AGIA?

Is there any basis in fact or common sense that would require the State to continue what is clearly a contract that is compromised by a conflict of interest by the grantee of the exclusive under that contract?

The latest cost estimate to construct a 3.0 bcf/da natural gas pipeline from the North Slope to Valdez is now estimated by TransCanada and Exxon to be $65B, including the LNG train at Valdez. The last estimate of the cost of construction for the AGIA Alberta Hub pipeline was approximately $40B. Compare the $65B cost of the AGIA LNG option to that the cost of the Kitimat 1.7 bcf/da >39 inch natural gas pipeline to be built by TransCanada under its agreement with Shell Oil. The cost of the Kitimat natural gas pipeline is just $4B Canadian.

(http://www.bloomberg.com/news/2012-10-04/exxon-bp-estimate-alaska-lng-export-project-at-65-billion.html)

Is the $65B price tag of the Alaska natural gas pipeline and LNG train under AGIA just hype to dissuade any protest at further delays?

Are we really closer to a natural gas pipeline? Nah.

http://www.examiner.com/article/closer-to-a-natural-gas-pipeline

In an Anchorage Daily News op-ed piece on May 11, 2012, Governor Sean Parnell extolled that his Administration was closer than ever to a large diameter natural gas pipeline being built, because of the settlement with Exxon over the Pt. Thompson development. One has to wonder just what this guy is on in terms of meds? He must be on the same psychotropic, hallucinogenic medications that the Legislature is on.


Otherwise, how could one reconcile the Legislature’s seemingly mindless following of Rep. Mike Hawker’s and House Speaker’s Mike Chennault’s incredible determination to wipe the 2002 vote and mandate of 138,000 Alaskans off the record, to remove same from State Statute, and to prove that the State will expend hundreds of millions to demonstrate that LNG from Russia can be imported cheaper to south central than their pipedream. This in the face of $14/tcf-$17/tcf LNG delivered in Japan.

What is it about the all-Alaska natural gas pipeline option that causes it to never be spoken of by our Governor and by our Legislature, never considered as a viable option, never mentioned by the Press, yet, demonstrated by the market as being incredibly prescient, given that this option was voted on and passed—you know, mandated—by the vote of 138,000 Alaskans way back in 2002? The only Republican candidate to champion this option was Bill Walker with his run for Governor in 2010.

Governor Parnell has asked nicely for TransCanada and the Producers to consider the LNG option to Valdez under AGIA. TransCanada and Exxon said sure, and now, studies will be made to determine the viability of that option through December of this year, and beyond. Is that not all that Governor Frank Murkowski’s so called contract achieved? A promise to “study”?

In the meantime, prices in Japan are $14/tcf-$17/tcf for LNG delivered to Japan. The cost of Alaska LNG delivered to Japan estimated by the Wood-Mac report for AGPA was $8.50/tcf. The proposed all-Alaska natural gas pipeline to Valdez championed by Bill Walker’s run for governor in 2010 called for a 3bcf per day pipeline from the North Slope to Valdez with 250mcf being taken off at Glennallen and delivered by a spur line to the Enstar Hub at Palmer. That left 2.75bcf per day for delivery to world markets. Under Walker’s proposal, the gas liquids would have been retained in Alaska for use to build a petrochemical industry and to provide alternative fuels for the Bush.

Every day, the governor has his head up his posterior, the Legislature is entranced by Hawker’s and Chennault’s Pied Piper routine, the State denies itself $15,125,000 at a sale price of $14/tcf delivered. Over the course of a year that is $5.52billion. Kiss another $5.52B good-bye by December 31 of this year.

The oil companies down south are moving, developing, and continuing to explore based upon $2.02/tcf of methane. Methane that may be exported, which will compete with Alaska gas and may even displace our gas in Asian markets, given our governor’s and our Legislature’s inability to see the handwriting on the proverbial wall.

Japan is shutting down its nukes, and Alaska has a market for our natural gas, if we want it. Two delegations from Japan have come to talk with the State, the first rebuffed by our Governor just after the 2011 earthquake.

Our DNR Commissioner met with the most recent Japanese delegation, our Lt. Gov. had dinner with them, but . . . nothing. Our DNR Commissioner goes to the PRC to investigate the LNG market, but not to Japan. After 41+ years of trade in LNG to Japan, Alaska is unwilling to discuss the potential with the Japanese.

Unlike our governor and his administration, Senator Lisa Murkowski is trying to do just that with her recent meetings with the Japanese Prime Minister and members of the Japanese Diet. Murkowski is trying to sell Japan on Alaska LNG, but is wasting her time in the face of a hostile Parnell Administration.

What's wrong with this picture, Alaska?

The Legislature with CB9 and CS9 have told the people to stick it with our 2002 vote, that our vote meant nothing. We have been proven right in the market, but our State leaders have shown their contempt for our will by completely ignoring what we mandated.

This governor and our Legislature have ignored us, when we were right all along.

Yet, now, Governor Sean Parnell extols that Alaska is closer than ever before to getting a pipeline??!!!!

Nothing like the obvious biting one in the butt . . .

The recent announcement by Governor Sean Parnell of his new found support for the LNG natural gas pipeline option was not a surprise. This is a guy who has been politically urinating into the wind for at least the last two years. He has stayed true to Palin’s AGIA in the face of industry trends that dictated an end to the big pipe south before AGIA was even enacted. Governor Parnell could not ignore LNG market trends and the impact of domestic U.S. and Canadian shale gas production any longer without looking like the proverbial village idiot.

Even the pols in the Legislature are getting on the LNG train.

You know something has become so obvious that it cannot be ignored when our legislators begin to mouth platitudes about something that they have ignored since, what, about 1984?

The proverbial handwriting was on the wall for all to see, but those in elected office.

Just before Conoco announced the end of the charade that was the Denali natural gas pipeline project, the president of Conoco in Alaska stated that the intent of Conoco all along was to warehouse North Slope natural gas into the foreseeable future. Why would Conoco conceal its intent to do nothing with its North Slope gas? Conoco and Exxon have a 25 year commitment to move LNG from Qatar to the U.S., where there is no longer a market. Asia is now that market.

Qatar represents a $22B USD investment on the part of Exxon and Conoco to upgrade the northern and southern LNG gas trains and production facilities to meet export obligations. The first LNG tanker with Qatar LNG docked at a U.S. LNG import terminal earlier this summer, where the gas was off loaded and then reloaded back onto a LNG tanker, and shipped to a foreign market. The gas was not used in the U.S.

The Wood-Mac Report on the Alaska Gasline Port Authority’s website supports the viability of exporting Alaska natural gas from Valdez. The estimated cost of delivery to an Asian market for Alaska LNG is $10 per million BTUs (mmbtu equals one thousand cubic feet). Cost of natural gas and shipping from the North Slope to Japan via the all-Alaska natural gas pipeline to Valdez is estimated in the Wood-Mac report at $8.50/mmbtu total, delivered. Pipeline transport is estimated at $1.70/mmbtu, with shipping to Asia by LNG tanker estimated at $.59/mmbtu.

The All-Alaska Natural Gas Pipeline project would have a total volume of 2.7 billion cubic feet per with 250 million cubic feet going to south central via a spur line from Glenallen. It is the volume of gas shipped to Valdez that keeps the price of the 250mcf/day to south central low enough that our natural gas prices would not increase. Further, the gas liquids would be kept for use in-state to provide the resources for a new petrochemical industry in the Fairbanks area.

In 2010, the Japanese were paying up to $12/mmbtus for LNG. The highest price paid this year by Japanese LNG customers has been almost $17/mmbtu.

BG Group PLC of Great Britain has made a significant commitment with Cheniere Energy Partners, Sabine Pass, LA, to export shale gas as LNG to Asia. BG expects a sale price for the LNG at 115% of the Henry Hub price plus a $2.25/mmbtu premium.

Wood-Mac’s projections for a delivered price from Sabine Pass is $10.50/mmbtu, or $2/mmbtu more than delivered Alaska gas. LNG shipping costs to Asia from LA are about four times higher than from Alaska. BG is so bullish on LNG that BG has another LNG export project of its own underway at Lake Charles, LA.

Election year is coming up, and the pols up for election have to fool those idiots that vote once again into believing that they are really gonna do something about Alaska’s economic situation . . . this time, if only they are reelected! We are supposed to ignore bad decisions and the lack of initiative and indecision since about 1994.

Only the State of Alaska’s leadership seems to be incapable of grasping industry trends. Natural gas export by LNG is viable from the U.S. and is being aggressively pursued by all, but Alaska.

Alaska needs real leadership, not more of the same.