Feb 12: AGIA. Odds & ends that seem odd

With a growing number of questions surrounding the AGIA process, we try and break down some of the arguments and highlight the questions that still demand answers.

From the 2004 Transcanada proposal that was negotiated under the Murkowski administration by current gas line team members to the $8.9 billion withdrawn partners liability, we run down the loose ends.

Transcanada's withdrawn partners liability

While Transcanada has repeated in recent legislative hearings that their $8.9 billion withdrawn partners liability will not impact their AGIA bid and that they won't roll any of it into the tariff, there still remains serious questions.

While Transcanada has said they believe it's not a problem, that does not speak for the withdrawn partners. With an $8.9 billion question out there, the more important question is will any of the withdrawn partners file suit and thus delay the project.

This potential for litigation becomes even more likely when  Transcanada takes on partners for the gas pipeline project. While Transcanada has a market cap of $21 billion, the introduction of a partner like ConocoPhillips, that has a current market cap of $130 billion, means deep pockets will attract more attention.

The most troubling fact is that the administration has yet to provide legislators with a legal opinion clearing this issue up. This issue of the withdrawn partners has been known for years by the gas line team, which makes the lack of a substantive legal opinion troubling.

Transcanada's proposal with the Murkowski administration

During a House open caucus meeting two weeks, Representative Jay Ramras asked DNR Commissioner Tom Irwin if the legislature could  review Transcanada's previous gas pipeline proposal that was negotiated by Marty Rutherford and Sean Parnell.

Irwin told Rep. Ramras that it was confidential. In a lengthy legal response to legislators last week, the governor and the DNR provided only a 29 page table of contents to the 2004 deal without shedding an light on the substance of the deal.

Those who are familiar with the previous proposal say it looks just like Transcanadas AGIA application with the exception that they proposed the State of Alaska act the part of the bridge shipper, thus taking the risk of the project.

In response to the administrations stiff arm, twenty three different legislators from across the aisle signed a letter requesting that both Transcanada and the state agree to mutual waiver of confidentiality.

The question must be asked, for a process that has been promoted as open and transparent why is the administration pushing back so hard, especially when they've been so consistent about dragging old Murkowski policies out just to beat them to death.

Transcanada's AGIA application

Given the fact that Transcanada has already testified that AGIA doesn't oblige them to build a pipeline and that they have the ability to seek board approval before committing to construction, there remains some serious questions from other potential applicants.

BG Group and Conoco have both stated that one of the reasons they failed to bid was that the process didn't allow them to seek final board approval. Transcanada seems to unilaterally negate that provision.

AGIA requires that the licensee continue to move forward toward FERC certification even if a failed open season occurs.

According to AGIA law 43.90.200

If the licensee is awarded a FERC certificate and has credit support (financing), they must sanction the project within one year from the date of receipt of the certificate.

If the licensee is awarded a FERC certificate and does not have  credit support, they have two years from the date of certificate award or five years from the date of the binding open season to sanction the project.

Nowhere in AGIA does it allow for a applicant to seek board approval before moving forward. The only explanation is that section d would then kick into play.

Section d states that if the licensee doesn't sanction the project  they must surrender the license back to the State with all of the work product completed during the project. (Engineering designs etc.)

This again highlights the fact that AGIA doesn't guarantee a pipeline which is exactly what the current administration complains was the problem with the previous gas line proposal.

Other odds & ends

Conoco's plan calls for them to open pipeline offices in both Anchorage and Fairbanks before open season.

Transcanada proposes opening an Anchorage pipeline office only after the open season.

Transcanada will require all gas to be shipped through their Alberta hub, which will add toll costs and prohibit shippers from bypassing the hub to go directly to the Midwest.