In what one lawmaker characterized as something of an “exit interview” for TransCanada, an official with the pipeline developer said Wednesday that the company has agreed to leave the $55 billion Alaska LNG project in a “mutual dissolution” with the state.
Vincent Lee, director of major project development for TransCanada, said the company learned in late spring of the Walker administration’s “strong desire” to buy the company’s interest in the gas treatment plant and the 800-mile-long pipeline.
Gov. Bill Walker has said the decision will give the state a greater voice in the overall project. Consultant Black and Veatch has said such a move will increase the state’s upfront costs by about $7 billion, but it will also bring the state a net gain of up to $400 million a year in profits.
Change in philosophy
Speaking to the House Finance Committee on Wednesday, Lee said the Walker administration’s approach was a change in philosophy from the previous administration that had sought TransCanada’s involvement, but it was an approach that TransCanada respected.
“Since then we worked on a plan with the administration such that we would exit in an orderly fashion and have as little impact to project momentum as possible,” said Lee.
Buying out TransCanada is the central question of the special session that began Saturday.
The Walker administration is asking the Legislature to provide $158 million to support the state’s role in the project — other project partners include ExxonMobil, BP and ConocoPhillips — with about $70 million needed for the TransCanada buyout.
The state’s oil company partners are “ambivalent” about the buyout, just as they were about TransCanada being involved in the project in the first place, said Kara Moriarty, president of the Alaska Oil and Gas Association, which represents members of the state’s oil and gas industry.
“They don’t have a position because it’s not up to the (oil) companies if the state chooses to end its relationship with TransCanada. That is a complete state decision,” she said.
Long relationship with Alaska
TransCanada, which operates 42,000 miles of pipelines in North America, has had a long relationship in Alaska’s decades-long quest to see a natural-gas project built to tap giant North Slope reserves.
The company originally worked on the Alaska Natural Gas Transportation System, a proposal doomed in the mid-1980s by changing market conditions, Lee said.
More recently, the company in late 2008 became the state’s licensee under the Alaska Gasline Inducement Act created during the Palin administration, receiving $327 million in state payments for working on that project.
State officials have said Alaska has received valuable information from TransCanada’s studies, and that the data has helped the state advance its gas-line prospects.
Lee said on Friday that TransCanada has agreed to commit its 15-person team to continue working on the project until May of next year so the effort can advance smoothly after TransCanada’s departure.
As part of the current agreement with TransCanada, the state must repay the company for its work in the project, at a 7 percent interest rate, whether or not a project is completed by 2025 as currently planned.
“Nothing personal, but we have to look at what’s best for the state’s financial interest,” said Rep. Les Gara, D-Anchorage, referring to such things as the higher operating income and lower borrowing costs that are expected if the state buys out TransCanada.
Lee said the project has a lot of potential. If the company had 100 percent ownership of the pipeline portion of the project — it currently shares that interest with the oil companies — it would be interested in staying with the project, he said.
Lawmakers, including Rep. Cathy Munoz, R-Juneau, asked the TransCanada official for his advice if the state goes ahead without TransCanada.
Lee said the state should take the long view instead of worrying about short-term market changes, and stay the course.
“Continuing the effort to push forward the project will bear fruit at the end of the day,” he said.
Related stories from around the North:
Canada: Energy challenges in Canada’s North, Eye on the Arctic
Finland: Experts question Finland’s energy decisions, data, Yle News
Norway: Japan wants wind power from Arctic Norway, Barents Observer
Russia: No alternative to Arctic oil says Russia environment minister, Barents Observer
Sweden: Will Sweden be able to produce enough energy in the future?, Radio Sweden
United States: Alaska weighs TransCanada buyout, Alaska Public Radio Network