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Exxon Mobil joins TransCanada on Alaska gas line By TOM FOWLER Copyright 2009 Houston Chronicle June 11, 2009, 2:56PM Share Print Share Del.icio.usDiggTwitterYahoo! BuzzFacebookStumbleUponExxon Mobil Corp. and TransCanada said today they will join forces to build a massive pipeline to move natural gas from the North Slope of Alaska to U.S. markets.
The state of Alaska granted TransCanada a license to build the project in January 2008, but the Calgary-based firm faced a challenge from another project planned by ConocoPhillips and BP. Exxon’s siding with TransCanada could threaten the Conoco-BP project, called Denali.
“Exxon Mobil and TransCanada have the experience, expertise and financial capability to undertake this project,” said Rich Kruger, president of Exxon Mobil Production Co. “We have on-the-ground knowledge of Alaska and Canada, experience working in the Arctic, a strong history of technology and innovation, and the proven ability to build and operate projects of enormous scale in the most challenging environments.”
Irving-based Exxon will not be a passive customer of the pipeline, which could cost as much as $30 billion and run 1,700 miles, but will likely be involved in the design and construction.
Alaska Gov. Sarah Palin met with Exxon officials in Dallas on Wednesday to make sure the agreement preserved the states’ relationship with TransCanada, said Kurtis Gibson, director of the Alaska Department of Natural Resources Oil and Gas Division.
“We’re encouraged and we’re excited, but we’re not surprise because (the state pipeline license) was designed for just this kind of alignment between private sector companies,” Gibson said.
The agreement between the two companies does not affect the license agreement between the state and TransCanada, said Gibson, and does not change the state’s relationship with Exxon on any other projects.
The state license to TransCanada also provides much of the fiscal stability Exxon is expected to ask for in the project, Gibson said, including a freeze on tax rates for the first 10 years of the pipeline’s operation, and “a willingness to revisit some of the state’s prerogatives on royalty treatment in order to not create obstructions.”
The Chronicle reported Wednesday that Exxon and TransCanada were in talks about the pipeline project.
Steve Rinehart, a spokesman for BP, said the company hasn’t seen details of the Exxon/TransCanada deal, but that the company’s goal “has been and is to get North Slope gas to market,”
“We need to and will consider any viable project to delivery the gas to market, but the project we’re a part of is Denali, we believe in it and it’s moving forward.”
If all goes as planned Exxon and TransCanada expect to conduct an open-season – where customers make bids to indicate their interest in having gas shipped on the line – by July 2010. They would apply for Federal Energy Regulatory Commission licenses in 2011 and 2012, begin construction in 2016 and start operations in September 2018.
The long-sought natural gas pipeline would be a companion to the Trans-Alaska Pipeline System that has been moving oil to U.S. markets since 1977.
The license followed a public bidding process initiated by Palin, who canceled a pipeline deal that her predecessor, Frank Murkowski, had negotiated in closed-door sessions with the three major North Slope producers. That deal was an issue in the Republican gubernatorial primary where Palin defeated Murkowski.
The three producers, Exxon, BP and Conoco, did not take part in Palin’s state bidding process, saying it did not provide the kind of tax and tariff assurances they needed. ConocoPhillips announced its competing project shortly after, and BP joined in that project in April 2008, which is now called Denali.
Many were skeptical of the state-backed project from the beginning, saying it cannot proceed without cooperation from the producers. Dwindling state coffers in Alaska, which relies heavily on royalties payments and taxes from oil and gas production, also undermined support. Some state lawmakers even pushed a resolution asking Palin to revisit the $500 million in incentives given TransCanada.
But a TransCanada-Exxon partnership would bolster the state-backed project, since Exxon holds many of the largest natural gas fields on the North Slope.
The Denali and TransCanada projects have been moving forward with planning work.
When ConocoPhillips and BP unveiled their Denali venture in April last year, they invited Exxon to join them. Exxon declined, and said publicly that it wasn’t aware of that proposal until a few days before it was announced. Exxon said at the time that it would evaluate the Denali plan as well as that of TransCanada, which was the only one of five in the Alaska bidding process that was chosen for further review by Palin’s administration. I believe this is going to help those understand more about this project!
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