Alaska gas pipeline open season: no decision until mid-2011, maybe 2012.

• Author: Bradner, Mike
• Position: OIL & GAS

Open seasons for the long-awaited Alaska natural gas pipeline are at last under way, and one, by TransCanada and Exxon Mobil Corp., concluded July 30 while the second, by the Denali consortium of BP and ConocoPhillips, is to conclude in early October.

People are anxious to hear any results, but they're likely to have to wait. The bids for capacity in the pipeline are confidential matters between the pipeline company and its potential customers, says TransCanada Vice President Tony Palmer. If there are no bids, TransCanada will probably announce this, he said. But this is very unlikely.

There are quite likely to be conditional bids, Palmer said, with details to be worked out, for which the company has allowed a period of months, hopefully by year-end, so formal "precedent agreements," or the first stage in a more detailed shipping contract, can be signed.

Denali President Bud Fackrell says the situation is the same for his company, except that everything will be later. Since Denali started its open season later than TransCanada, the date by which the pipeline company hopes to have precedent agreements signed is in early spring, 2011.

It is when the precedent contracts are signed that the pipeline company notifies regulatory agencies, and the public, that contracts are pending. There is a provision in the State's agreement with TransCanada under the Alaska Gasline Inducement Act (AGIA), which applied to TransCanada, not Exxon as yet, that the commissioners of natural resources and revenue can request a status report from TransCanada.

TransCanada has agreed to certain State terms on the pipeline under the AGIA statute and is receiving a $500 million State subsidy. Any information from the pipeline company must be held confidential, however, said revenue commissioner Pat Galvin. It is not known whether Galvin and Tom Irwin, the natural resources commissioner, will ask TransCanada for any information.

This provision did lead to a minor flap in the primary election race, however, where Republican candidate Bill Walker asked Gov. Scan Parnell, also a candidate in the race, to release the results of the open season before the August primary election. Parnell said he could not do this, even if he had the information.

EARLIEST DECISION MID-2011

The biggest condition, however, on capacity and gas-shipping contracts on the Alaska pipeline, either TransCanada or Denali, will be that producers want a long-term agreement with the State on tax and royalty terms, which requires action by the State Legislature. Since that will take a year, the final deals won't be struck until after the Legislature acts and the governor approves the changes. That will be mid-2011 at the earliest, or possibly even 2012.

It is believed precedent agreements can be signed with...