Alaska wants to cancel a license agreement with TransCanada for the pipeline company's work on a large natural gas pipeline and liquefied natural gas project, a state official said Thursday.
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Circumstances have changed since the agreement was signed with TransCanada in 2009, state Commissioner of Natural Resources Joe Balash said. This includes the emergence of joint venture that includes major North Slope producers and that the project has changed from a proposed land pipeline to the continental US to a pipeline across Alaska and a large LNG export project, he said.
If the project is built it is estimated to cost $45 billion-$65 billion and would ship 16 million-18 million mt/yearly of LNG, mainly to Asia.
"The license agreement, awarded under the Alaska Gasline Inducement Act, contemplates a single sponsor, in this case TransCanada, developing the project," Balash said. "The AGIA statute does not work very well when it comes to a joint-venture in which some of the participants do not endorse the terms of the license."
This does not come as a surprise to TransCanada, Balash said. "We've worked closely with them and they are very aware of this," he said.
A TransCanada spokesman could not be reached for comment.
The AGIA license entitled TransCanada to $500 million in state payments for reimbursement for project planning work, of which about $300 million has been paid to date, Balash said.
In return, TransCanada had committed to develop a project incorporating certain requests of the state, mainly that a rolled-in tariff be used to pay for pipeline expansions and to use a certain debt-equity ratio in financing for construction that would better protect state revenues.
North Slope producers do not support those terms, Balash said, so a problem developed when ExxonMobil joined TransCanada as a partner in the project and more recently when BP and ConocoPhillips began participating in joint studies and conceptual engineering.
Alaska's cost reimbursement, which was at 90%, was being shared by TransCanada with the producers under the license but without the producers agreeing to terms of the AGIA license. The three producers have said they will not develop a project under the AGIA terms.
The state overlooked this for a while as planning and conceptual engineering proceeded, but a more recent decision by the state to consider a major equity investment has led officials to conclude the agreement should be scrapped, Balash said.
State Deputy Revenue Commissioner Bruce Tangeman, meanwhile, said reimbursements to TransCanada for work done will continue to the end of the current fiscal year, next June 30.