The current and projected low prices in U-S natural gas markets have not slowed down the two pipeline companies competing to carry North Slope natural gas to market. Both TransCanada, with its state license approved under the AGIA process, and Denali Pipeline, a partnership project of B-P and Conoco-Philips, still expect to take their plans to potential producers next year. TransCanada’s vice-President Tony Palmer says he will start the Open Season process with a submission of information to the Federal Energy Regulatory Commission at the end of January. Once that is approved it will be made available for bidders who want to use the project – with conclusion in July. Denali’s Director of Media and Communications Dave MacDowell isn’t ready to set a date yet – only saying the Open Season will be held sometime next year.
An Open Season is when the pipeline company solicits long-term, multi-billion dollar shipping commitments from its customers. And in this case, the customers would likely include some of the North Slope Natural Gas leaseholders. There could be others as well.
While going to an Open Season is an important milestone, there is no guarantee that Alaska will walk away with a project ready to go. Neither company is ready to speculate on the results of the opening. However, neither would be surprised to receive bids that have certain conditions attached to them. TransCanada’s Palmer says that’s normal for large projects – and he’s getting signals from potential bidders to expect conditional bids.
That is the norm. And it’s also the norm that pipeline companies would then take a period of several months to work with those potential customers to see if they can resolve those conditions present. That’s typical in the pipeline industry.
Palmer won’t speculate on what conditions might be part of the bids, but MacDowell says he’s hearing that the big issue is fiscal certainty – in other words, taxes on the gas.
They’ve said they need to understand what the rules are around gas taxation in order to have the confidence they need in order to make these multi-billion dollar, multi-year shipping commitments that will be used to underpin pipeline financing.
Neither Denali nor TransCanada are able to address the stable tax issue – and so far there has been no indication of the subject coming before next year’s legislature.
MacDowell says the industry takes a long-term look at market conditions and prices. He says the next three decades are what matter, not the three dollar thirty five cent closing price for gas today in the lower forty eight.