The State of Alaska has given TransCanada Corp.permission to shift its attention to a natural gas pipeline project that would be capable of producing liquefied natural gas for export overseas.
In a Wednesday letter (PDF), Natural Resources Commissioner Dan Sullivan and Revenue Commissioner Bryan Butcher approved a project plan adjustment for TransCanada Alaska Wednesday under the Alaska Gasline Inducement Act.
“The commissioners agreed to allow TransCanada Alaska, the State’s AGIA Licensee, to shift its focus to a large-diameter line that will run from Alaska’s North Slope to tidewater in Alaska for in-state use, liquefaction and export,” officials from the state’s Gas Pipeline Project Office said in a statement Wednesday.
The proposed pipeline would have a large diameter, running parallel to the trans-Alaska pipeline for much of its length from Prudhoe Bay to tidewater -- although not necessarily to the Port of Valdez.
The change was requested by TransCanada after the North Slope's major players announced that they were aligning with TransCanada to pursue an alternative liquefied natural gas project. Its approval comes after the collapse of the Legislature's special session over a dispute on oil taxation, which left one of the items on Gov. Sean Parnell's agenda for the session -- legislation to build an in-state gas line to Fairbanks from either Cook Inlet or the North Slope -- an apparent casualty of the conflict.
“A key benefit of the PPA is that it enables all parties -- the North Slope producers, the State and the AGIA Licensee -- to come together for the first time to work on commercializing North Slope gas,” said Kurt Gibson, the project office's director.
The new route has many practical benefits, not the least of which is that it could actually be profitable.
In the wake of the magnitude 9.0 earthquake and tsunami that rocked Japan last March, killing 19,000 people also spawned a huge nuclear plant meltdown at Fukushima -- the worst since Chernobyl, and an event that has turned the Japanese against nuclear energy.
Now Japan desperately needs replacement power, and natural gas is the cleanest alternative among conventional fuels since it produces far fewer carbon emissions than coal. Furthermore, the southern coast of Alaska is only 3,500 miles from Tokyo
This means Alaska's 35 trillion cubic feet of North Slope natural gas may finally have a market. Japan is willing to pay $14 per 1,000 cubic feet -- seven times the going rate in the Lower 48, where the market is glutted with gas from hydraulic fracturing or "fracking" projects.
State Sen. Bill Wielechowski hailed Wednesday's announcement as beneficial for the state.
"We have a very strong Japanese market looking for this gas -- so I think it is a good development," Wielechowski said.
According to the state, about half of the work TransCanada has done on a pipeline through Canada’s Alberta province focused on providing gas to the Lower 48 is applicable to an in-state gas line.
“Some of the Alberta work will continue under the current PPA, either as dual use for an LNG project or to preserve work on the Alberta option for potential transfer to the State under terms of the license,” officials wrote. “This PPA will prevent unnecessary spending on the Alberta option while the LNG project is being developed.”
The firm is expected to provide a revised project plan adjustment incorporating elements of the new plan, which would also need to be approved by the state’s Natural Resources and Revenue commissioners, in early 2013.
TransCanada, which has an exclusive license with the state to pursue a line, had been focused mainly on the Alberta option, but the company hadn't announced any agreements with producers for it.
TransCanada faced an October deadline to apply to the Federal Energy Regulatory Commission for a certificate to build and operate the pipeline but the state pushed that back two years, to 2014, to accommodate the change in focus on projects.
The shift in the project will take considerable time, even if it's successful. The earliest point at which gas might flow through a large-diameter line would come in 2021, another nine years from now.
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